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Ukrainians are facing a new tax press: how online platforms will monitor your income

The government is preparing new tax pressure, this time not only for entrepreneurs but also for individuals. If the Verkhovna Rada passes a bill amending the Tax Code and a number of other legislative acts, most Ukrainian taxi drivers, landlords, and even OnlyFans models will face problems. That’s because operators of digital platforms such as OLX, Prom, Glovo, Uklon, Booking, and others will have to declare the income earned by their users – drivers, tenants, couriers, and others who sell goods or provide paid services. In other words, the draft law initiated by the Ministry of Finance is intended to establish taxation of people who earn unofficially on online platforms, Komersant ukrainskyi reports

The Cabinet of Ministers aims to bring national legislation governing the provision of services and the sale of goods through digital platforms in line with European standards. This document is considered part of European integration and one of the IMF’s conditions.

Since January 1, 2023, the European Union has been implementing the DAK7 Directive, which obliges marketplaces to annually report the income of sellers doing business on their platforms. All digital platforms operating in the EU are obliged to collect tax data on their users, prepare reports and send them to the tax authorities.

Thus, services such as Amazon, Booking, Airbnb, Uber, and others are required to report the income of sellers who sell goods or services through their platforms. The report contains information about the entrepreneur, the number of transactions, and their amounts. In addition, after the funds are credited to the entrepreneur’s bank account, the bank also notifies the tax authorities of the payments received. Therefore, it is quite difficult to evade taxation in the EU, as both the bank and the digital platform provide information on the income of each entrepreneur. It is expected that a similar system will be introduced in Ukraine.

No hiding from the tax authorities

Since the goal of the draft law is to make everyone who uses the platform and earns money pay, the amount of taxes under the draft law will be as follows: a person who earns money through an online platform will have to pay 5% personal income tax (PIT) and 5% military duty, which is 10% in total.

In order to implement this faster, the platform operator is obliged to establish and include the following information in the income statement of the accountable sellers of individuals: first and last name; main address of residence; tax identification number (TIN); individual tax number of the VAT payer, if any; date of birth. In other words, Ukrainians will have to provide all the information about themselves, just like entrepreneurs.

The following types of activities via the online platform are subject to reporting:

• a) leasing of real estate, including residential and non-residential real estate, as well as any other real estate and parking spaces
• b) personal services
• c) sale of goods;
• d) lease of vehicles.

Thus, a system of fines will be introduced if platform operators fail to submit a report on the income of sellers or fail to do so on time. And if the tax authorities find incomplete information about the seller, inaccurate data, or incorrectly entered TIN numbers or errors in the full name, the platform operator will also be fined for each such client.

But the main thing is that even foreign online platforms will be obliged to report in Ukraine on the income of Ukrainians earned abroad. Therefore, data on the money earned on such popular services as Amazon, eBay, Envato Market, OnlyFans, UpWork, as well as other digital platforms, regardless of their purpose (photo stock, job search, sale of goods or services, etc.) will be available to the State Tax Service.

Ukrainians will run to flea markets

According to Oleh Pendzin, an expert at the Economic Discussion Club, a number of online platforms are already submitting information about users and paying tax to the Ukrainian budget. First of all, these are foreign platforms such as Google and OnlyFans.

Ukrainian women from OnlyFans have already found themselves in an unpleasant situation, since pornography and everything related to it is criminalized by law, but on the other hand, they still want to collect income tax from them. Like a tax. And on the one hand, they have already collected the tax from them, and now they want to punish them for distributing pornography.

“It should be clearly understood that if this bill is adopted to pay tax on a transaction, there are nuances in controlling the process. For example, a car is being sold, but its taxation is controlled by the registration authority, although the ad can be placed on an online platform,” emphasizes Oleg Pendzin.

“It is also necessary to clearly understand the amount of tax that starts to be paid. If you sell an old TV for 15 UAH on OLX, the point of taxation is immediately lost. How can you control the price?

“We have everything upside down. In civilized countries, people are interested in filing a tax return with their income, because the tax authorities there control expenses, not income. If a citizen wants to buy something expensive, he or she must confirm the origin of the money spent on this purchase. And if you need to confirm the origin, you need to file an income tax return, pay taxes, and so on. Otherwise, when you buy a TV or a car, the tax authorities will become interested and will be immediately informed about the purchase. And if they see discrepancies between income and expenses, they will demand an explanation of how you managed to buy an expensive product with a minimal income. No one monitors income this way. It’s not realistic. Only expenses can be monitored, and they are large,” says Oleh Pendzyn.

As soon as this bill is passed, people will go to flea markets, the economic expert is sure. They will sell their goods or offer services bypassing Internet platforms, for example, in Telegram or Facebook groups. And well-known online platforms will lose customers and lose their raison d’être. And they have good earnings and pay taxes.

Author: Alla Dunina