March 29, 2021 · 6 min read
What types of bank accounts exist
According to NBU Instruction No. 492, banks have the right to open current, deposit (savings) accounts, and escrow accounts for individuals and legal entities.
We are specifically interested in the current account.
What is a current account for a sole proprietor (FOP)
Simply put, this is the main settlement account to which payments from customers are received and from which all expenses related to entrepreneurial activity are made.
A current account can be:
- hryvnia
- foreign currency
- multi-currency (when both hryvnias and foreign currency are accounted for in one account).
You do not need to notify the tax authorities about opening a business account; banks independently transmit this information to the tax authorities.
Personal and Business Accounts: Can a personal card be used for sole proprietor (FOP) needs and vice versa
Can a customer pay for goods/services to a sole proprietor's (FOP's) personal account
Tax authorities have a clear position on this matter. They are against receiving business income into personal accounts. And even if you received income on a personal card and transferred this amount to the FOP account, keep in mind that such a scheme of work is not prescribed anywhere, and auditors will definitely pay attention to this during an inspection. This means that income from entrepreneurial activity should only be received into the FOP account.
Can a sole proprietor (FOP) spend money from their business account for personal needs
Entrepreneurs must spend money from their FOP accounts on expenses related to their entrepreneurial activity, and pay for personal expenses from personal accounts. Therefore, if you want to use income at your discretion, i.e., make personal expenditures, transfer funds from the business account to a personal one.
Can a sole proprietor (FOP) pay taxes from a personal card or in cash
Tax authorities state that a sole proprietor (FOP) can pay taxes and fees from their personal card or in cash through a bank's cash desk (ZIR, subcategory 129.04). This will be of interest to those who work only with cash. For tax payment purposes, it is not mandatory to open a current account with a bank.
How to withdraw funds from a sole proprietor's (FOP's) account
There are several ways to do this:
- Withdraw money through the bank's cash desk. Keep in mind that there will be a cash withdrawal fee. Also, be aware that cash transactions exceeding UAH 400,000 fall under financial monitoring.
- Transfer funds from the business account to a personal one.
A short 7-minute and useful video about RRO for sole proprietors (FOP) in 2022 and possible penalties can be viewed on our YouTube channel "Biznesuy".
What to consider when opening a foreign currency account for a sole proprietor (FOP)
If you plan to work with foreign currency, you need to open a foreign currency account in the currency you will be using. Bank details for foreign currency payments differ slightly from hryvnia details, so you should clarify the current details with your bank.
If funds in foreign currency are received into your foreign currency account from customers, be prepared that the bank may request confirmation of the foreign currency payment. But don't be alarmed :) This is a standard procedure. To provide confirmation, you just need to send copies of documents to the bank electronically (a letter about the crediting of funds in any form, invoice/contract, etc.).
Can a sole proprietor (FOP) transfer money from a business foreign currency account to a personal one
When working with foreign currency, a sole proprietor (FOP) should know that, according to para. 113 of NBU Regulation No. 5, they are prohibited from transferring money from a business foreign currency account to their personal foreign currency account.
Can a sole proprietor (FOP) withdraw foreign currency cash from their business account
A sole proprietor (FOP) cannot directly withdraw foreign currency cash from their foreign currency account. To do this, they must first sell the foreign currency at a time specified by the bank for such operations and wait for the hryvnia from the currency sale to be credited, and only then can these funds be disposed of.
What is an IBAN account and why is it needed
Are you being asked to send your bank details with IBAN specified, but you don't know what it is or where to find it?
It's simple, IBAN (International Bank Account Number) is an international bank account number. It was introduced to simplify transactions between banks, not only Ukrainian ones but also those from different countries around the world.
An IBAN consists of 29 characters. Here's how it looks schematically.
*If the account number contains fewer than 19 digits, zeros are placed before the account number to make a total of 19 digits, for example, 0000026001234567891.
When opening an account with a bank, the IBAN is generated automatically.
What are the advantages of using IBAN
- with a single detail (IBAN account), you can identify the payer/recipient of funds and the servicing bank
- it has become easier to prepare payment documents, as the MFO (Bank Identifier Code) and account number are encrypted in the IBAN, whereas previously they existed as separate details
- it will be easier for you to avoid errors in details, as there are fewer of them.
With the use of IBAN, you will be able to process payments, transfer, and receive money faster.
You might also be interested in our blog articles on how a sole proprietor (FOP) can choose a bank to open a business account, as well as whether a sole proprietor (FOP) on Group 2 can work with an LLC.
And another video about electronic sick leaves from the UHY Prostor team)
;You can learn more about our accounting service on the page "Accounting Outsourcing".
