To properly and consistently close a sole proprietorship, a person needs to take several steps. And submitting an application for closure is only the first part of the journey. Find out how to completely close a sole proprietorship, deregister from the tax authorities, and cancel all accounts

Legal assistance in starting and doing business in Ukraine

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If you decide to terminate your business activity, you need to file a corresponding application with the state registrar or submit an application for termination of business activity in electronic form, for example, through the citizen's account on the Diia portal.

Remember! A sole proprietor loses the status of an entrepreneur from the date of making the relevant entry in the Unified State Register. 

Read this article to learn how to change the sole proprietor's data through Diia.

How to deregister a sole proprietorship with the tax authorities after the termination of entrepreneurial activity?

The state registration of the closure of a sole proprietorship does not relieve you of your obligations arising from the conduct of business. In fact, the sole proprietorship is still registered with the State Tax Service as a taxpayer who received income from business activities.

Therefore, in case of closing a sole proprietorship, you must:

➤ Submit the statutory liquidation reports - for the simplified taxation system, this is a single tax return and a single social contribution report

➤ Make final settlements with the budget by paying the necessary taxes and fees - obligations that are stipulated in the last reporting period and those that arose earlier but were not repaid on time.

➤ If the sole proprietor submitted Form 20-OPP, it must also be canceled by submitting a Report on Form 20-OPP with information on the closure of the taxable object(s).

➤ If the sole proprietor has a registered cash register, it must also be deregistered.

Closing a sole proprietorship's bank accounts

To terminate the sole proprietorship, all existing business accounts must be "zeroed out" and closed by submitting a corresponding application to the servicing bank.

By the way, the list of open accounts can be checked in the Payer's Electronic Account, in the section "Payer's Credentials" - "Bank Account Data".

Also, generate a statement of cash flows for all accounts from the date of a possible tax audit to the date of the official closure of the sole proprietorship. 

We have previously described how to submit sole proprietorship reports through Diia or the tax application.

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Documentary audit of a sole proprietorship before liquidation: when is it carried out and what do you need to know about it?

The very fact that a sole proprietorship has started the procedure for terminating its business activity is a reason to conduct a documentary unscheduled audit of the taxpayer for at least the last 3 years. But keep in mind that the statute of limitations was temporarily suspended due to quarantine and later due to the introduction of martial law. 

Submitting an application for termination of business activity and submitting liquidation reports does not mean that your sole proprietorship is completely closed. After the state registration of the termination of entrepreneurial activity, the individual continues to be registered with the regulatory authorities as a taxpayer who received income from entrepreneurial activity. And only a documentary audit will be the basis for deregistration of the sole proprietorship and will mean the completion of the procedure for termination of business activity.

However, not all sole proprietorships are subject to such an audit. The tax authorities exercise their right to conduct an unscheduled documentary audit if they deem it necessary.

However, you can initiate an audit yourself if you still want to completely deregister from the tax authorities as soon as possible. To do this, you need to write a corresponding application to the State Tax Service. It is your right to undergo a documentary unscheduled audit.

First of all, this may be relevant for those who want to move to another country for permanent residence. In all other cases, there are no grounds to initiate an inspection on your own. 

During the audit, you will need to provide the tax authorities with all documents related to your business activities. And even if you have closed your sole proprietorship but do not plan to initiate deregistration yourself, you should keep the documents required for the audit. 

Keep in mind that the period within which the tax authority decides to appoint a documentary unscheduled audit, in particular, in case of termination of the sole proprietorship, is not defined by the Tax Code. Therefore, you should always be prepared for this.

You can get advice on opening, running and liquidating a sole proprietorship in Ukraine on the Visit Ukraine portal. Our lawyers will answer all your questions and, if necessary, help you solve urgent problems. To order a legal consultation or full legal support, please follow this link.

We remind you! The Ukrainian authorities have fixed a plan to increase taxes for individual entrepreneurs and set a new level of subsistence minimum and wages, which accordingly affected the amount of taxes for individual entrepreneurs of groups I-III. Read how much individuals now have to pay and what other changes to expect in the near future in our previous article.