Pensioners-FOPs and ESC: Should They Pay All Taxes

Since January 1, 2025, the payment of a unified social contribution has become mandatory for most individual entrepreneurs after a prolonged period of voluntary contributions. The minimum amount is 1,760 hryvnia per month. However, the legislation provides important exceptions for pensioners. Let us examine in detail what taxes and contributions pensioners-FOPs must pay.

Exemption from ESC: Main Benefit

Ukrainian legislation defines three categories of entrepreneurs exempted from ESC for themselves: retirees by age (regardless of pension type), retirees by length of service (military personnel, educators, law enforcement, and others), persons with disabilities of all groups receiving pension or social assistance.

Key requirement: pension is paid according to Ukrainian legislation. If pension is from another state, exemption does not apply.

Automatic Application and Exceptions

In most cases, there is no need to inform the tax authority. The Pension Fund and tax service exchange information automatically. Exceptions apply to FOPs with disabilities receiving social assistance. They independently confirm their status with a copy of the MSEC certificate (issued before January 1, 2025) or an extract from an expert team decision. Check your status in the Electronic Cabinet of Taxpayers.

When Exemption Takes Effect

If a FOP acquired pensioner status in the middle of the year, ESC is paid in full (1,760 hryvnia) for that month. Exemption takes effect from the following month. For example, if retired on July 15, ESC is paid for July in full, and exemption begins in August.

Unified Tax and Military Levy

Exemption from ESC does not mean exemption from other payments. Legislation does not provide benefits on the unified tax for pensioners. They pay it in full depending on their group.

Rates of unified tax in 2025: first group – 302.80 hryvnia/month; second group – 1,600 hryvnia/month; third group – 3–5% of income. Military levy: first and second groups – 800 hryvnia/month; third group – 1% of income.

An entrepreneur-pensioner in the second group pays monthly: tax 1,600 hryvnia + levy 800 hryvnia = 2,400 hryvnia. But is exempt from ESC (1,760 hryvnia). Annual savings: over 21,000 hryvnia.

Voluntary ESC Payment and Pension Recalculation

Legislation allows voluntary payment. It does not change the amount of assigned pension but is taken into account when recalculating pensions for working pensioners. Recalculation is performed if at least 24 months of service record is accumulated, automatically once per year from April 1. The decision depends on individual circumstances.

Reporting for Pensioner-FOPs

Pensioner-FOPs do not submit Appendix 1 (regarding ESC). For the month of acquiring pensioner status, ESC is paid in full. From the following month, the obligation ceases. If you mistakenly submitted the appendix, file a new declaration with corrections.

Practical Recommendations

Stop paying ESC from the month after acquiring pensioner status. Do not submit the appendix for periods of exemption. Regularly check your status in the Electronic Cabinet of Taxpayers. FOPs with disabilities should submit documents to the tax authority. Important: exemption applies only to the FOP itself. For hired employees, ESC is paid mandatorily.

Conclusions

Pensioner-FOPs have the right to a significant benefit: exemption from ESC for themselves. This benefit extends to retirees by age, by length of service, and persons with disabilities. However, they pay the unified tax and military levy without benefits.

Author – Yulia Popadin, lawyer, tax and customs law practitioner at the Attorney Association “Legal Company WINNER“.

If you have questions about taxation, application of benefits for pensioner-FOPs, appealing decisions of authorities, pension recalculation, or other matters – contact our team of professionals in the field of tax and customs law.