# General or Simplified Tax System for an LLC: The Case of a Digital Marketing Company

> Case study: comparing Ukraine's general tax system with the simplified system (group 3) for a digital marketing LLC, including VAT and accounting costs.

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Tax rates and thresholds are given for 2026. The legal provisions were verified as of September 25, 2026. The calculations are illustrative and depend on the underlying assumptions. Before applying them, take into account the current rules and the circumstances of your business.

The client planned to launch a digital marketing business in Ukraine working with bloggers and contractors. Before starting, it needed to compare the tax systems, assess the consequences of value-added tax (VAT) registration and factor in the cost of accounting services.

## Input data for the calculation

The model was built for a Ukrainian limited liability company (TOV in Ukrainian, referred to here as an LLC) with the following parameters:

- revenue of 400,000 Ukrainian hryvnias (UAH) per month in the first two months and UAH 700,000 per month in the next ten;
- operating expenses of roughly 80% of revenue;
- a team of up to six employees;
- contractors: bloggers and service providers;
- outsourced accounting.

Annual revenue under this scenario:

2 × 400,000 + 10 × 700,000 = UAH 7,800,000.

This is a modeled scenario: if revenue after the second month exceeds UAH 700,000, the results need to be revisited.

## Tax systems compared

General system: the standard corporate income tax rate for an ordinary LLC is 18%. The tax base is the financial result with tax adjustments, where applicable. [Corporate income tax rates — State Tax Service of Ukraine (in Ukrainian)](https://od.tax.gov.ua/media-ark/news-ark/971149.html).

Group 3 without VAT: 5% single tax (a tax on revenue under Ukraine's simplified system) + 1% military levy, 6% of revenue in total. These are two separate payments. Contractor expenses don't reduce their base. [Single tax rates (in Ukrainian)](https://dp.tax.gov.ua/media-ark/news-ark/968478.html), [military levy for group 3 (in Ukrainian)](https://kyivobl.tax.gov.ua/media-ark/news-ark/print-1032107.html).

In 2026, the annual revenue cap for group 3 is UAH 10,091,049. The forecast in this case is UAH 2,291,049 below it. Besides the cap, the other conditions for using the simplified system must be checked. [Conditions for legal entities — State Tax Service (in Ukrainian)](https://od.tax.gov.ua/media-ark/news-ark/print-994721.html).

## Preliminary tax comparison

For the calculation, we assume that all revenue is received within the year, income and expenses are recognized in the same year, and there are no tax adjustments. The effect of VAT isn't taken into account yet.

| Indicator | General system | Group 3 without VAT: 5% + 1% |
| --- | --- | --- |
| Annual revenue | UAH 7,800,000 | UAH 7,800,000 |
| Expenses: 7,800,000 × 80% | UAH 6,240,000 | UAH 6,240,000 |
| Profit before the compared taxes | UAH 1,560,000 | UAH 1,560,000 |
| Corporate income tax: 1,560,000 × 18% | UAH 280,800 | — |
| Single tax: 7,800,000 × 5% | — | UAH 390,000 |
| Military levy on the LLC's revenue: 7,800,000 × 1% | — | UAH 78,000 |
| Total compared taxes | UAH 280,800 | UAH 468,000 |

Preliminary difference:

468,000 − 280,800 = UAH 187,200 in favor of the general system.

However, these aren't the final savings yet: the cost of accounting, VAT and the completeness of the expenses in the model still need to be considered.

## How the cost of accounting services affects the result

In the case's input data, the approximate annual budget for accounting services was:

- under the general system: UAH 300,000;
- under the simplified system: UAH 100,000.

These are estimates for this specific case, not universal rates.

For the next calculation, we make a separate assumption: accounting services aren't included in the 80% operating expenses. Under the general system, these expenses reduce profit provided they're properly recognized in the accounts.

| Indicator | General system | Group 3 without VAT: 5% + 1% |
| --- | --- | --- |
| Revenue | UAH 7,800,000 | UAH 7,800,000 |
| Operating expenses | UAH 6,240,000 | UAH 6,240,000 |
| Accounting services | UAH 300,000 | UAH 100,000 |
| Profit before the compared taxes | UAH 1,260,000 | UAH 1,460,000 |
| Corporate income tax: 1,260,000 × 18% | UAH 226,800 | — |
| Single tax and military levy: 7,800,000 × 6% | — | UAH 468,000 |
| Compared taxes and accounting services | UAH 526,800 | UAH 568,000 |
| Estimated balance after these expenses and taxes | UAH 1,033,200 | UAH 992,000 |

After factoring in accounting services, the difference is:

568,000 − 526,800 = UAH 41,200 per year in favor of the general system.

If accounting services are already included in the 80% expenses, they must not be added again. In that case, the composition of expenses should be clarified and both scenarios recalculated.

The balance shown isn't the final distributable profit: the model doesn't yet account for the effect of VAT and other possible payments. Personnel costs and the related charges must also be included in the budget without omissions or double counting.

## Separate VAT calculation

Under the general system, mandatory VAT registration is triggered by exceeding UAH 1 million of qualifying supply transactions over the last 12 calendar months, not by revenue of any kind. Single tax payers in groups 1–3 are exempt from this rule. [Guidance of the State Tax Service (in Ukrainian)](https://dp.tax.gov.ua/media-ark/news-ark/print-980776.html).

If all receipts in the model relate to transactions counted toward this threshold, in the third month their cumulative amount will be:

400,000 + 400,000 + 700,000 = UAH 1,500,000.

So the threshold will be exceeded. Modeling the general system as operating without VAT for the whole year under these conditions is incorrect.

A digital marketing company needs to establish:

- exactly which services it provides and where their place of supply is determined;
- whether its contracts allow VAT to be added to the price;
- which contractors are VAT payers and whether input VAT can be claimed;
- whether the company buys advertising or other services from non-residents.

For advertising services, the place of supply is determined by the recipient. At the same time, buying advertising services from a non-resident can create a VAT liability even for a legal entity that isn't registered as a VAT payer. [Advertising services to residents and non-residents (in Ukrainian)](https://kyiv.tax.gov.ua/media-ark/news-ark/547296.html), [receiving advertising services from a non-resident (in Ukrainian)](https://cvp.tax.gov.ua/media-ark/news-ark/563687.html).

## Conclusion for the business

A high share of expenses makes the general system worth considering, but doesn't guarantee that it's the better option.

In the model above, the difference between the compared taxes is UAH 187,200. After factoring in a separate accounting services budget, it shrinks to UAH 41,200. VAT and changes in the other assumptions may alter this result.

That's why the tax system should be chosen on the basis of a full financial model. The amounts shown are estimates, not confirmed client savings.

## Related services

- [Accounting Services for Manufacturing Companies](https://www.uhy-prostir.com/en/for-manufacturing/index.html.md)

## Frequently asked questions

### What taxes does a company in group 3 without VAT pay?

The single tax is 5% of revenue, and the military levy is a separate 1%. Together, these two payments amount to 6% of revenue.

### Does a high share of expenses always make the general system more beneficial?

Not necessarily. Expense recognition, tax adjustments, VAT, the cost of accounting services and other payments must be taken into account.

### Does an LLC need to register for VAT if its revenue exceeds UAH 1 million?

For an LLC in group 3 at the 5% rate, exceeding this threshold doesn't by itself trigger a registration obligation under the general rule. Under the general system, the volume of qualifying supply transactions must be assessed. Certain VAT liabilities may arise regardless of registration.

### Can this calculation be applied to another company?

Yes, as an example of the comparison logic. For a decision, you need to use your own figures and check your contracts, your counterparties' tax status and the current rules.

This material is for information purposes and doesn't replace individual analysis. Changes in legislation, the contractual model or the input figures may change the results of the comparison.

## Related insights

- [Taxes for an LLC in Ukraine – Up-to-Date Information for Business](https://www.uhy-prostir.com/en/blog-en/taxes-for-an-llc-in-ukraine-up-to-date-information-for-business/index.html.md): After the registration of an LLC, most business owners focus on sales, their team and company development. Tax matters are often postponed “for later.” (2026-05-13)
- [Transition to a simplified tax system for legal entities: what you should know](https://www.uhy-prostir.com/en/blog-en/transition-to-a-simplified-tax-system-for-legal-entities-what-you-should-know/index.html.md): Business owners and managers turn to our company to help them choose the optimal tax system for their company. (2024-05-16)
- [Choosing the optimal taxation system for running a business in Ukraine](https://www.uhy-prostir.com/en/blog-en/choosing-the-optimal-taxation-system-for-doing-business-in-ukraine/index.html.md): When clients turn to us for recommendations on which tax system to choose for doing business in Ukraine, we usually provide a list of key criteria that will help them independently determine the most optimal option. (2024-05-07)
- [Avoiding Tax Issues for LLCs Contracting with Group 2 Simplified Tax Sole Proprietors](https://www.uhy-prostir.com/en/blog-en/avoiding-tax-issues-for-llcs-contracting-with-group-2-simplified-tax-sole-propri/index.html.md): Prostir Accounting Services Company provides accounting services for Ukrainian and international companies, representative offices, non-profit organizations and foundations, and sole proprietors (FOP). (2021-01-15)

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