Before you start registering a sole proprietorship or a legal entity, you need to decide on the types of activities you plan to engage in. Each of these types corresponds to a specific KVED (classifier of the type of economic activity) - a four-digit digital code.
These codes make it possible for government bodies, primarily the tax service, to find out exactly what you receive funds for, and therefore, how you generate income.
That is why the tax rate of your activity, the procedure for submitting reports, interaction with other entrepreneurs and enterprises, etc., will depend on the chosen KVED.
Where can I find a comprehensive list of KVEDs?
We recommend using it a directory of current KVEDs, posted on the official website of the State Statistics Service of Ukraine. You can view it by following the link: https://kved.ukrstat.gov.ua/.
Of course, you can find the necessary KVEDs on other unofficial pages on the Internet. However, they very often contain errors either in the description of the type of activity, or in the digital code itself.
To select KVED through the official directory, you must first click on KVED-2010 and select section, that is, a specific industry. These are, in particular, wholesale and retail trade, construction, processing industry, etc. Next we define section, group, and class activity, which will be considered the final KVED.
Please note that when moving to each subsequent structural unit of the directory, you can use detailed explanations, which indicate the cases when KVED is suitable and when it is not. Such clarifications will greatly help in the choice of future entrepreneurs who do not have sufficient experience and qualifications in such matters.
Registration of KVEDs for the first time and making changes to them
Initial registration of KVEDs takes place at the same time as the registration of the FOP or legal entity.
For this, it is necessary to contact the state registrar through the National Register of Citizens or a notary public. When registering an FOP, you can also independently make an online request through the "Action" service.
The main document, on the basis of which the registration of KVEDs takes place, is statement regarding state registration of a legal entity/FOP (registration application). It contains the information block "Information about a legal entity/FOP". It is there, among other information, in the column "Types of economic activity" that the digital codes of the selected types of activity are indicated.
Application forms can be found on the website of the Ministry of Justice of Ukraine at the following link: https://minjust.gov.ua/m/formi-zayav-u-sferi-derjavnoi-reestratsii-yuridichnih-osib-fizichnih-osib-pidpriemtsiv-ta-gromadskih-formuvan.
If you plan to register an FOP through the "Diya" service, then such an application is not required, since the information is entered in electronic form.
During the registration of a legal entity, information about KVED is also indicated in minutes of the general meeting of the founders or decisions of the participant on the creation of a legal entity.
Procedure for making changes to already registered KVEDs is almost identical to the order of their registration for the first time. The only difference is that when changing KVEDs in the registration application, only the first page, the column "Types of economic activity" and information about the applicant are filled out. All other information about participants, location, founding document, etc. are not indicated. At the same time, the introduction of changes to KVEDs is also formalized by the minutes of the general meeting or the decision of the participant.
As a rule, when adding a new type of activity in the registration application, a "+" sign is placed next to the KVED, and in the case of excluding a type of activity - "-". However, the requirements for registration documents are different for each registrar and notary, so this point should be clarified before registration in order not to receive a rejection due to a technical error.
What is the maximum and minimum number of allowed KVEDs? Main and additional KVEDs
No restrictions on number of KVEDs, which you can choose for your business, is not established by law. This applies to both FOPs and legal entities.
However, it is better to choose KVEDs "in reserve". This means that if you currently plan to engage exclusively in the trade of passenger vehicles (KVED 45.11), but later want to carry out maintenance and repair of vehicles (KVED 45.20), then it is better to immediately register both of the specified KVEDs.
This is due to the fact that the tax rate does not depend on the number of KVEDs. However, if you engage in activities for which KVED is not registered, trouble may arise. We will note this in the next section of this article.
We also draw attention to the fact that when registering types of activities are determined main KVED and additional ones.
Everything is simple here: the main KVED is the main line of business for which it is planned to receive the largest income, and additional KVEDs are secondary types of activities.
Consequences of incorrect selection of KVEDs: implementation of prohibited activities and activities outside registered KVEDs
The legislation defines the list of types of activities that it is forbidden for sole proprietorships and legal entities (also separate sole proprietorships) to engage in groups 1-3 of the simplified taxation system.
These types, in particular, are:
- conduct of gambling games, issuing activities and conducting lotteries;
- foreign currency exchange;
- business management activities;
- extraction, sale of minerals, except sale of minerals of local importance;
- organizing activities, holding tour events, etc.
The full list of prohibited types of activities is specified in clause 291.5. Article 291 of the Tax Code of Ukraine.
For sole proprietorships and legal entities in the 4th group of the simplified taxation system, it is prohibited to carry out activities related to:
- poultry breeding;
- breeding and breeding of quails and ostriches;
- poultry meat production;
- production of excisable goods, except for grape wine materials according to established paragraphs 291.5-1.2. of the Tax Code of Ukraine conditions.
Despite the above prohibitions, if the FOP or a legal entity will register KVED, which in a certain part includes prohibited activities, and wishes to become a single tax payer, then the tax service will not be able to refuse this, provided that such activities are not carried out.
If the FOP or legal entity of groups 1-3 starts to engage in prohibited activities, does not switch to the general taxation system on its own, then the tax service during the inspection may cancel the registration of a single tax payer.
In the event that the FOP or legal entity of the 4th group commits similar violations, then he taxes from which he was exempted as a single employee will be added, and a fine will also be applied.
Separate attention should be paid to the implementation by taxpayers of a single activity tax under unregistered KVEDs. Such actions can also lead to deprivation of the status of a single tax payer and an increase in the tax rate. All this will cause an excessive tax burden on business.
We can conclude that the choice of types of economic activity should be approached comprehensively in order to avoid negative tax consequences.
