Tax on digital platforms. Bill No. 14025 legalizes millions of online sellers. How is it useful for small businesses?
Senior economist at CASE Ukraine Volodymyr Dubrovsky in a column for Forbes tells how the draft law on taxation of income from digital platforms will be the key to legalizing millions of Ukrainian internet entrepreneurs
Key theses:
- Today, these incomes are part of the shadow economy, which, on the one hand, violates tax justice and fair competition, and on the other, spreads an illegal culture in society.
- According to current legislation, individuals must pay personal income tax and military duty on “net income” (total – 23%). The compromise was a simplified taxation system, which employs about one and a half million individual entrepreneurs.
- It was possible to convince the government and deputies that taxing all suppliers on general terms is a dead end, and to reach a compromise concept on which bill No. 14025 is based: – 5% tax on income; – plus, unfortunately, another 5% military levy – until the end of martial law.
- This is worse than the conditions of the 3rd group of the single tax, but within the limits of the “tithe”. And most importantly – without any complications, registrations, accounting, and accordingly without discretionary checks of individuals.
- This is achieved due to the fact that the platforms agreed to take on the role of tax agents, and also, probably, part of the tax – that is, taxi drivers, couriers, tutors will not register as individual entrepreneurs themselves (and will not be responsible for their property), and will also not have to submit reports.
- Their income will become legal, which will allow them to get access to loans at normal interest rates, visas, and in general, will allow them to feel like full citizens.
- The state plans to receive UAH 14 billion from them in 2026
The most controversy arose over the “sale of goods”. Current legislation unlawfully considers “income” to be proceeds from the sale of any property – formally, 18% personal income tax must be paid on the sale of a used baby stroller. Fortunately, this norm was “dormant” due to its obvious absurdity.
On the other hand, unofficial traders occupy a significant share of the market, massively sell smuggled and counterfeit goods, constituting unfair competition to legal trade, in particular to honest individual entrepreneurs.
It would be necessary to study this issue and once and for all determine clear criteria for separating entrepreneurial activity from the sale of personal property. But so far, the deputies have limited themselves to a threshold of €2,000 per year when selling through the platform, without limiting the number of transactions. This is a fairly reasonable temporary solution.
More details in the article.