Ukrainian sole proprietor (FOP) vs. Tax Residency in the EU: Where and to Whom You Must Pay Taxes

The Ukrainian sole proprietor (FOP) is truly one of the most favorable tax models in Europe. However, it works only as long as the person is a tax resident of Ukraine.
If a person actually lives in the EU, has everyday ties there, and spends more than 183 days in the country, a completely different reality arises: they become a taxpayer in the country of residence. This is where the greatest misunderstandings and risks begin.

Ukrainians in the EU often have two separate “tax statuses”

Status 1: Tax residency in Ukraine

Ukrainian sole proprietor (FOP) registration
Payment of taxes in Ukraine
Entrepreneur status
Accounts in Ukrainian banks

Status 2: De facto tax residency in the EU

Living in the EU for more than 183 days
Rented housing
Family in the EU
Payment of utilities
Main expenses via local bank cards
Integration into the local economy

Key point: if you are a tax resident of an EU country, that country requires you to declare your entire worldwide income, including income earned through a Ukrainian Ukrainian sole proprietor (FOP).

“I pay taxes in Ukraine, so everything is legal” — a misconception

Many Ukrainians think:

I pay taxes in Ukraine → therefore I don’t have to pay them in the EU.

For EU tax authorities, this is not an argument.

It does not matter that you pay the single tax (ЄП) in Ukraine.
If you are a resident of Portugal / Spain / Germany / Croatia, you are required to pay taxes there on income from employment and entrepreneurial activity.

Ukrainian taxes are not EU taxes.
And very often they cannot be credited against personal income tax liabilities in the EU at all.

What can happen if you continue working through a Ukrainian sole proprietor?

Reclassification of income
as income of an EU tax resident
Retroactive tax assessments
Penalties and late-payment interest
Social security tax
Contributions to the local pension system
Attention from financial monitoring authorities
when funds are transferred from Ukrainian accounts to local bank cards

Double taxation treaties: do they really help?

They help avoid being taxed twice.
But they do not mean that you can choose where to pay taxes.

Typical mechanism:

You pay tax in the EU
Ukrainian taxes may be credited (but not always)

Important: many EU countries do not consider the Ukrainian sole proprietor single tax to be an “income tax” and therefore do not credit it at all.

Conclusion

A Ukrainian sole proprietor is not protection against tax obligations in the EU.
The fact that you pay taxes in Ukraine does not release you from the obligation to pay taxes in the EU if your real life takes place there.

The essence is simple:
Taxes are paid not only where the Ukrainian sole proprietor is registered, but where the person actually lives.

If you remain a Ukrainian Ukrainian sole proprietor but physically reside in the EU, you may already have an obligation to pay taxes abroad. A professional consultation can help adjust your model before claims arise from foreign tax authorities.

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