Everyone should pay: business is in favor of taxing income from digital platforms, but with reservations
14 May 09:42
The strengthening of control mechanisms provided for in the draft law, which introduces an international automatic exchange of information on income received through digital platforms, should help create a fair competitive environment and conditions for the development of responsible business. This is stated in the statement of the European Business Association, dedicated to the preparation for the consideration of this draft law in the parliament, "Komersant Ukrainian" reports.
The European Business Association noted the importance of partial consideration of business proposals for simplified administration of the activities of persons who, during the reporting year, carried out no more than three transactions for an amount not exceeding EUR 2,000 in the hryvnia equivalent, which is in line with European practice.
At the same time, given the significant impact of the proposed changes in taxation on the business environment, the EBA experts draw attention to the provisions that still need to be finalized.
What do business representatives propose to take into account?
According to the EBA, it is important to enshrine the requirement to monitor and report on all transactions, including cash transactions, to ensure equal and fair taxation conditions for all market participants, minimize tax loopholes, and prevent tax evasion.
In addition, the business proposes to postpone the application of penalties for submitting false or misleading reporting information for 1 year from the date of entry into force of the relevant law. This will facilitate effective interaction between accountable platform operators and tax authorities.
The EBA experts believe that it is necessary to clearly define in the legislation the special status of individuals who carry out activities through a platform operator without registering their business activities in order to ensure legal certainty and avoid the risk of requalification of such persons as employees.
In order to avoid difficulties with the registration of a special taxpayer status for individuals and the issue of disclosure of bank secrecy, it is proposed to either open special accounts in Ukrainian banks or make such registration available through the state service Diia.
The European Business Association is convinced that the implementation of these changes will help increase the tax transparency of digital economy entities.
What innovations does the draft law contain?
According to the draft law, the State Tax Service will be able to automatically receive data from digital platform operators and international bodies on individuals who receive income without registering a private business or using the simplified taxation system. The draft law also provides for liability for failure to provide, untimely or incomplete provision of such information.
This draft law proposes to define digital platform operators as tax agents and to oblige them to automatically collect tax on the amount of income of an individual – an accountable seller – from “reporting activities”: leasing real estate, personal services, selling goods or leasing vehicles.
Income will be taxed at a rate of 5% if the seller meets certain requirements (a bank account opened specifically for reporting activities, no self-employed status, no employees, and annual income from reporting activities not exceeding 834 minimum wages).
Otherwise, the tax rate will be 18%. The same rate is set if the annual income exceeds the established limit of 834 minimum wages (by the amount of the excess).
If a seller has made no more than three sales during a calendar year for a total amount not exceeding the equivalent of EUR 2,000 per year, such a person has the right not to open a separate account but may use the existing ones.
When opening a current account for an accountable seller, the taxpayer must provide the bank with consent to the bank’s disclosure of information containing bank secrecy.
Who will be affected by the law
The draft law states that the following activities are subject to taxation
– leasing of real estate, including residential and non-residential real estate, as well as any other real estate and parking spaces
– personal services
– sale of goods;
– leasing of vehicles.
Thus, the law, if adopted, will apply to such companies as OLX, Prom, LUN, Kabanchik.ua. Self-employed couriers, taxi drivers, landlords, i.e. those who earn money by providing services through platforms such as Bolt, Uklon, Booking or Glovo, may be subject to taxation.
