Sole proprietor group 2 or 3 in 2026: which pays off at your income

The short version

So the choice comes down to two questions. First: are you allowed to be in group 2 given your activity, clients and number of employees. Second, only if you are: which is cheaper at your income.

1. 1Who are your clients?Services to companies on the general system, foreigners or Diia City residents - group 3 only
2. 2How many employees?More than 10 at a time - group 2 is not an option
3. 3What is your annual income?Above the group 2 limit - group 3 only
4. 4How much do you earn a month?Below the break-even point group 3 is cheaper, above it group 2

Is group 2 open to you

The group 2 restrictions matter more than the difference in tax: break them and the benefit of the fixed tax disappears, while income from a prohibited transaction is taxed at 15%.

Clients: who you may provide services to

A group 2 sole proprietor may provide services, including household services, only to the population and to single tax payers. The restriction applies to services specifically: group 2 may sell and produce goods and run catering for any customer. In practice this means:

The State Tax Service has separately explained what counts as «the population» and how to treat clients who are abroad: this is where mistakes are most common. If even one of your customers is someone group 2 cannot serve, it is safer to choose group 3 from the start.

Employees and the income limit

In group 2 you may have no more than 10 employees under employment contracts at the same time. People engaged under service contracts do not count towards this number. The group 2 income limit is 834 minimum wages as of 1 January, UAH 7,211,598 in 2026, or about UAH 600,967 a month on average. For group 3 the limit is 1,167 minimum wages, UAH 10,091,049.

The rate in your community

UAH 1,729.40 is the maximum group 2 rate. The actual rate for a community is set by the local council, and it may be lower. If you work in several communities, the maximum rate applies. Check your council's decision: the break-even point below depends on the rate.

Which is cheaper: the break-even point

ESV is the same in both groups, so you only need to compare the single tax and the military levy. In group 2 that is 1,729.40 + 864.70 = UAH 2,594.10 a month whatever your income. In group 3 without VAT it is 5% + 1% = 6% of income.

The higher the income, the bigger the gain from group 2: at UAH 200,000 a month it saves more than UAH 113 thousand a year. But for such a business the risk of losing the group because of the «wrong» client is also the most expensive.

The full burden including ESV

To see the real share of taxes in your income, add ESV. The minimum ESV of UAH 1,902.34 a month is the same for both groups, but at a low income it becomes the largest part of your taxes.

You can calculate the taxes for your own income and rate in the single tax calculator.

Uneven income: when group 3 wins even above the break-even point

In group 2 the tax is fixed every month, even in months without a single order. In group 3 it is calculated on the income actually received. So for a seasonal business, look at the average income over the year: the income of the busy months distorts the picture.

If your income hovers around the break-even point, the difference between the groups is small. Then other factors decide: your clients, the risk of a mistake with the group 2 restrictions and how convenient the reporting is.

Reporting and payment deadlines

Group 3 requires four returns a year, and they must be filed even for quarters with no income. In return, you pay tax on money you have already received, with no advance payments. Group 2 reporting is simpler, but the advance payments are easy to forget: every overdue month means a late-payment penalty.

What changes in 2027

Group 2 rates are tied to the minimum wage as of 1 January. Under the draft 2027 budget the minimum wage will be UAH 9,546. Then the maximum group 2 single tax will be UAH 1,909.20, the military levy UAH 954.60, and together UAH 2,863.80 a month. The break-even point will rise to UAH 47,730 of income a month, so group 3 will become cheaper for a slightly wider range of entrepreneurs. The minimum ESV will rise to UAH 2,100.12 in both groups.

The final figures depend on the adopted budget. We will update this article as soon as the 2027 minimum wage is approved.

How to change groups

1. Check that you meet the conditions of the new group: activity, clients, number of employees and income. To move to group 2, your income since the start of the year must not exceed its limit.
2. Submit an application through the Electronic Cabinet no later than 15 calendar days before the next quarter begins. The new group applies from the first day of the next quarter.
3. Report under the old group for the period you were in it. When moving from group 2 to group 3, you file a return for the quarter, and it replaces the annual one.
4. Change your payments: from the new quarter, stop paying the fixed advance amounts or, the other way round, start paying them.

Who fits which group: typical situations

The table shows the general logic. Specific activities have extra bans and exceptions in the Tax Code, so before choosing a group check your activity code against the Code's lists or ask the tax office. The general rates for all groups, deadlines and sample calculations are collected in “Sole proprietor taxes in Ukraine in 2026”.

Group 3 with VAT: when the 3% rate makes sense

A VAT payer in group 3 pays 3% single tax instead of 5%, but adds 20% VAT to their prices and handles tax invoices. This pays off when your main clients are VAT-registered companies: they can claim your VAT as input tax credit, so for them the price with VAT effectively does not rise. If you work with individuals or non-VAT payers, your services simply become 20% more expensive for them, so for most small sole proprietors group 3 without VAT is simpler and cheaper.

Frequently asked questions

Can a group 2 sole proprietor work with foreign customers?

Group 2 may not provide services to non-residents: services are allowed only to the population and single tax payers. That is why freelancers and IT specialists working with foreign clients choose group 3.

Is ESV the same in group 2 and group 3?

Yes. The minimum ESV for yourself is 22% of the minimum wage, UAH 1,902.34 a month, regardless of group and income. You can pay more: how that affects your insurance record and pension is covered in “Sole proprietor pension”.

Can I move from group 3 to group 2 in the middle of the year?

Yes, from the start of the next quarter, if your income since the start of the year does not exceed the group 2 limit and you meet its other conditions. The application is filed no later than 15 days before the quarter begins.

What happens if a group 2 sole proprietor provides a service to a company on the general system?

Income from that service is taxed at 15%, and from the next quarter you will have to move to group 3 or the general system. So if such clients are possible, it is better to be in group 3 from the start.

Does group 2 pay off if income is irregular?

Calculate it on your annual income. The fixed group 2 tax has to be paid even in months without income, so for a seasonal business with an average income near the break-even point group 3 may turn out cheaper.

Key points

• Group 2 in 2026: UAH 2,594.10 a month in single tax and military levy (at the maximum rate); group 3 without VAT: 6% of income. ESV of UAH 1,902.34 is the same.
• The break-even point is UAH 43,235 of income a month: below it group 3 is cheaper, above it group 2. With a community rate below the maximum, the break-even point is lower too.
• Group 2 is possible only for services to the population and single tax payers, with no more than 10 employees and income up to UAH 7,211,598 a year. Foreign clients, companies on the general system and Diia City residents mean group 3 only.
• For uneven income, calculate on the annual figure: the fixed group 2 tax is paid even in months without orders.
• You can change group from the next quarter by applying 15 days before it starts. Income above the limit or from a prohibited activity is taxed at 15%.
• In 2027, under the draft budget, the break-even point will rise to UAH 47,730 a month.

Figures in this article

• Minimum wageUAH 8,647/mo
  from January 1, 2026
• ESV rate22%
  from January 1, 2016
• Minimum wage for 2027 (draft budget)UAH 9,546/mo
  from 1 January 2027, draft
• Minimum ESVUAH 1,902.34/mo
  calculated: 22% of the minimum wage
• Group 2 single tax, maximumUAH 1,729.40/mo
  calculated: 20% of the minimum wage
• Military levy, groups 1-2UAH 864.70/mo
  calculated: 10% of the minimum wage
• Group 2 income limitUAH 7,211,598/yr
  calculated: 834 minimum wages
• Group 3 income limitUAH 10,091,049/yr
  calculated: 1,167 minimum wages
• Group 3 single tax5%
  group 3 without VAT
• Military levy, group 31%
  group 3, on income

Checked against official sources on October 29, 2026. If a figure changes, we update the article and the «Updated» date changes automatically.

Sources

1. State Tax Service, Dnipropetrovsk region - group 2 single tax and military levy in 2026: UAH 1,729.40 and 864.70, paid in advance by the 20th (in Ukrainian)
2. Factor - group 2 sole proprietor: full 2026 guide (employee and client restrictions, rate, ESV, annual return) (in Ukrainian)
3. LIGA:ZAKON - group 2 conditions in 2026: no more than 10 employees and income up to UAH 7,211,598 (in Ukrainian)
4. LIGA:ZAKON - group 2 sole proprietors and clients abroad: State Tax Service explanation, 05.11.2026 (in Ukrainian)
5. 7eminar - can a group 2 sole proprietor provide services to Ukrainians living abroad (in Ukrainian)
6. Debet-Kredyt - State Tax Service explains who counts as «the population» for group 2, 2026 (in Ukrainian)
7. Factor - reporting and payment deadlines: group 3 quarterly, groups 1-2 annually; group 3 tax due within 10 days after the return deadline (in Ukrainian)
8. Factor Academy - switching from group 3 to group 2: income limit, application at least 15 days before the quarter starts (in Ukrainian)
9. Debet-Kredyt - exceeding the limit or a prohibited activity: 15% on the excess, 2026 (in Ukrainian)

This material is for information only and is not tax advice. Rates are given as of November 2026 at their maximum values; the group 2 rate in your community is set by the local council. Before changing groups, check your activities and clients with the tax office or an accountant.