Ukrainian Sole Trader in Germany: Keep It Open or Close It — and Where Do You Pay Tax?
You’re in Germany. Your Ukrainian FOP — sole trader registration (Ukrainian: ФОП) — is still open back home. Do you keep paying as before, close it, or change something? The answer has nothing to do with where the FOP is registered. It comes down to two things: which country claims you as a tax resident, and where you actually do the work.
The point that gets missed most often: Ukraine’s unified tax does not exempt you from German tax. And Germany won’t credit that unified tax against what it charges on your business income.
# Step 1. Ukrainian residency: the Tax Code usually keeps you in
Art. 14.1.213 of Ukraine’s Tax Code establishes residency through a cascade of tests: permanent home in Ukraine; if you have a home in both countries, center of vital interests; then at least 183 days in Ukraine; then citizenship. For the “center of vital interests” test, the law explicitly names two sufficient — though not exclusive — conditions: your family lives in Ukraine or you’re registered as a sole trader (FOP).
So if you kept your Ukrainian home and your FOP registration, Ukrainian law will most likely treat you as a Ukrainian tax resident even while you’re living in Germany. And residents can use the unified tax system. The ban under Tax Code Art. 291.5.7 applies to non-residents: if you have no home in Ukraine and the State Tax Service formally reclassifies you as a non-resident, you lose access to the simplified system.
There’s no requirement that a FOP owner be physically present in Ukraine. Running a FOP from Germany is legal.
# Step 2. German residency: a home or six months is enough
Germany taxes everyone with unlimited liability who either has a home there (Wohnsitz) or spends more than six consecutive months in the country (§ 1 EStG, §§ 8–9 AO). Most Ukrainians who’ve been in Germany longer than half a year are German tax residents.
That means you can be a resident of both countries at the same time. That’s exactly what the treaty exists to resolve.
# Step 3. Who wins: Article 4 of the 1995 treaty
The double-taxation treaty between Ukraine and Germany was signed on July 3, 1995. A new treaty was signed on May 19, 2026, but it isn’t in force yet — it’s expected to apply from January 1, 2027, provided ratification is completed before December 31, 2026. Throughout 2026, the 1995 treaty governs.
When someone is a resident of both countries, Art. 4 runs through a tie-breaker sequence to assign residency to one: permanent home; if homes exist in both, center of vital interests (family, work, economic ties); then habitual abode; then citizenship. If you’re living in Germany with your family, working from there, and renting out your Ukrainian apartment, the treaty will most likely designate you a German resident. If your family stayed in Ukraine and your apartment sits empty for you, the answer could go the other way.
# Where FOP profit gets taxed
Under Arts. 7 and 14 of the 1995 treaty, business profit and income from independent personal services are taxed in the country of your treaty residency. The other country can only tax the portion earned through a permanent establishment or fixed base on its territory — a physical office or premises through which you actually work.
For a typical FOP owner sitting in Germany with a laptop, this plays out as follows: if the treaty makes you a German resident and you have no office in Ukraine, Germany taxes the profit under its standard progressive income tax scale.
Ukraine will still charge unified tax, because under the Tax Code you’re a Ukrainian resident with an active FOP. You can’t offset that against the German bill: Germany credits Ukrainian tax only on specific income categories — dividends, interest, royalties, and a few others — not on business profit. So you end up paying in both countries.
Example. Group 3 FOP, annual revenue UAH 600,000, no other income.
- In Ukraine: unified tax at 5% — UAH 30,000; military levy at 1% — UAH 6,000; ESV at UAH 1,902.34 × 12 = UAH 22,828.08. Total: UAH 58,828.08.
- In Germany, if you’re the treaty resident: UAH 600,000 converted at the NBU rate on October 12, 2026 (UAH 50.31 per €1) equals roughly €11,926. If your taxable profit after expenses stays below €12,348 (Germany’s 2026 basic allowance), German income tax is €0. If you have other German income, FOP profit stacks on top and gets taxed at progressive rates.
Calculate the Ukrainian side using the FOP tax calculator — the German side requires a Steuerberater (German tax adviser) or the Finanzamt itself.
# ESV contributions from Germany: the exemption is over
The wartime exemption that let FOP owners skip unified social contribution (ESV) payments for themselves has been suspended for 2025 and 2026 under Laws No. 4059-IX and No. 4695-IX. From January 1, 2025, ESV is back: a minimum of UAH 1,902.34 per month (22% of the UAH 8,647 minimum wage), even with zero income.
Group 1 and Group 2 FOP owners pay additional unified tax on top — UAH 332.80 or UAH 1,729.40 per month, respectively — plus the military levy of UAH 864.70 per month. A Group 1 FOP with no clients costs UAH 332.80 + UAH 864.70 + UAH 1,902.34 = UAH 3,099.84 per month just to keep open.
# Three scenarios
Keep the FOP and carry on. This makes sense if your clients are in Ukraine, the FOP is needed for contracts, and you plan to return. Do the math on the combined burden: Ukrainian payments plus German income tax if you’re a German treaty resident. Declare the income in Germany — it’s a legal obligation, and the consequences of not filing are worse than the tax itself.
Close the FOP. The cleanest option if you’re not planning to operate as a Ukrainian sole trader and you’re already settled in Germany. You can close a FOP online through Diia (Ukraine’s government services app) or through a state registrar — including via an authorized representative with a power of attorney. After closing, you’ll need to file a final tax return and pay any outstanding ESV and tax balances. You can continue working in Germany as self-employed: register with the Finanzamt for freelance activity, and additionally with the Gewerbeamt if your work qualifies as a trade or craft (Gewerbe).
Do nothing. The worst option. Ukrainian charges keep accruing, and undeclared income in Germany can trigger back-taxes and penalties from the Finanzamt.
For a broader look at choosing a business structure, see FOP vs LLC in Ukraine 2026.
# What else to declare in Germany
As a German tax resident, you report worldwide income in your Einkommensteuererklärung (annual income tax return):
- FOP profit — under the rules above;
- Rental income from a Ukrainian apartment — Ukraine may tax this (treaty Art. 6), but Germany exempts it from direct taxation while factoring it in to determine the rate applied to your other German income (Progressionsvorbehalt, § 32b EStG). See Renting Out Your Ukrainian Apartment from Germany: Taxes in Ukraine and Germany for details;
- Interest from a Ukrainian bank deposit — taxed in Germany at Abgeltungsteuer 25% plus 5.5% solidarity surcharge on that tax, after the Sparer-Pauschbetrag allowance of €1,000 per person; Ukrainian withholding tax is credited only up to the rate the treaty permits.
The most common mistake: assuming that paying unified tax in Ukraine settles the matter with the Finanzamt. It doesn’t. Filing a complete declaration with all income is far better than explaining later why you filed nothing.
On money transfers: moving funds between your own accounts in Ukraine and Germany doesn’t trigger Bundesbank reporting. But if you receive a single payment over €50,000 from another person or a foreign company — for example, a client payment — you must notify the Bundesbank (§ 67 AWV).
Practical steps: before filing your first German tax return, consult a Steuerberater. In Ukraine, you can obtain a tax residency certificate from the State Tax Service to invoke treaty protections formally.
One more thing if you were on Group 2 before moving: Group 2 FOP can only serve other unified-tax payers and private individuals. Serving foreign clients — including German ones — requires Group 3. More detail in IT Freelance and Taxes in Ukraine 2026: FOP Group 3, ESV, Foreign Currency.
# See also
- FOP Tax Calculator 2026 — unified tax, ESV, and military levy for your group
- FOP Abroad: Taxes, Residency, and the Simplified System in 2026 — overview covering multiple countries
- Taxes for Foreigners in Ukraine: 183-Day Residency and Double Taxation — residency criteria from Ukraine’s side
- How to Open a FOP in Ukraine 2026: Groups, Documents, Taxes — if you need to re-register after returning
Frequently asked questions
Can I keep a Ukrainian FOP while living in Germany?
Yes. Ukrainian law doesn't require a FOP owner to be physically in Ukraine. Under Tax Code Art. 14.1.213, FOP registration is sufficient to establish a center of vital interests in Ukraine, so you'll typically remain a Ukrainian tax resident and can continue using the simplified (unified) tax system. You lose that right only if Ukraine's Tax Service formally classifies you as a non-resident under Art. 291.5.7.
Where do I pay tax on FOP income if I live in Germany?
Ukraine charges unified tax for as long as the FOP is active. Germany taxes the profit if, under the 1995 treaty, you're classified as a German tax resident and have no permanent establishment or fixed base in Ukraine through which you actually work (Arts. 7 and 14). Germany does not credit the Ukrainian unified tax against its own income tax.
Do I still have to pay the unified social contribution (ESV) from Germany?
Yes, for as long as the FOP remains registered. The wartime exemption that let FOP owners skip ESV payments has been suspended for 2025 and 2026. The minimum contribution is UAH 1,902.34 per month — even with zero income.
What happens if I just leave the FOP open and do nothing?
ESV, unified tax, and the military levy keep accruing. If you're simultaneously working from Germany and qualify as a German treaty resident, you're also obligated to declare that income to the Finanzamt — and the Ukrainian payments won't offset the German tax.
Do I need to report my Ukrainian FOP income to the Finanzamt?
Yes, if you're a German tax resident: Germany taxes worldwide income. The 1995 treaty determines which country has the right to tax each category of income.