Draft Law on reporting and Taxation of Income Received Through Digital Platforms is Being Considered

On March 7, the Ministry of Finance published for discussion the Draft Law “On Amendments to the Tax Code of Ukraine and Certain Other Legislative Acts of Ukraine Regarding the Implementation of International Automatic Exchange of Information on Income Received through Digital Platforms”.

The explanatory note states that the implementation of international automatic exchange of information on income received through digital platforms is an international obligation of Ukraine in accordance with the Memorandum with the IMF and the National Revenue Strategy of Ukraine.

The Draft Law proposes to introduce a new article “International Automatic Exchange of Information on Income Received through Digital Platforms” into the Tax Code of Ukraine, which defines the main requirements for the establishment of accountable sellers by accountable platform operators and the submission of reports on income received by accountable sellers through platforms for the purposes of the Multilateral Agreement on the Automatic Exchange of Information on Income Received through Digital Platforms.

Reporting platform operators must:

– apply due diligence measures to identify reporting sellers among platform users;

– submit to the State Tax Service reports on the income of reporting sellers that they receive from carrying out reporting activities. Reporting platform operators are obliged to submit to the supervisory authority a report on the income of reporting sellers by January 31 each year. The reporting period is the previous calendar year;

– submit an application for their registration with the State Tax Service within 60 calendar days after the operator establishes the status of a reporting platform operator.

The following types of activities are established as reporting activities:

– rental of real estate (including residential and commercial real estate, as well as any other real estate and parking spaces);

– personal services;

– sale of goods;

– rental of vehicles;

– a clear list of information to be submitted by accountable platform operators to the State Tax Service in the report on the income of accountable sellers;

The following is also set out:

– liability for platform operators for violation of the requirements for identifying accountable sellers and submitting reports for the automatic exchange of information on income received through digital platforms;

– requirements for storing documents confirming the implementation of due diligence measures by the accountable platform operator (at least 5 years from the date following the deadline for submitting the report on the income of accountable sellers, for the preparation of which the specified documents are used or to which they relate).

The proposed rules will apply to both accountable non-resident sellers and accountable sellers resident in Ukraine.

It is envisaged to establish a tax rate of 5% for such income and to impose the duties of a tax agent on accountable platform operators. An individual taxpayer who meets the following criteria is eligible for the 5% rate:

1) has at least one current account opened specifically for the purposes of reporting activities, and notifies each accountable platform operator with whom an agreement has been concluded to provide access to the platform of the number (details) of the current account through which settlements are made during the reporting activities;

2) makes settlements during the reporting activities exclusively in monetary form – cash or non-cash – using a current account opened specifically for the purposes of reporting activities;

3) no decisions have been made regarding the taxpayer to apply special economic and other restrictive measures (sanctions) in accordance with the procedure established by the Law of Ukraine “On Sanctions”;

4) is not a self-employed person in accordance with the Tax Code;

5) does not use the labor of employees;

6) the amount of income received by them during the calendar year does not exceed UAH 5 million;

7) does not sell excisable goods.

Draft Law