On June 9, the Verkhovna Rada adopted a bill on a tax on online sales of goods and the provision of services on the Internet, or, as it is called, the “OLX tax.” The innovations will come into force next year. The project caused a lot of discussion and protests. The GORDON publication looked into what is in it.
What are we talking about
The bill introduces a new system of income taxation in the digital economy. It concerns Internet platforms, Ukrainian and foreign (such as Bolt, Uklon, Uber, Airbnb, Glovo and others), which provide transportation, delivery, housing rental, goods sales services on the Ukrainian market, as well as those who sell something through these platforms or receive income through them. Roughly speaking, if you sell something on OLX, Shafa or Prom.ua, this will affect you. If you buy, then directly – no.
Online platforms will automatically collect 10% tax on the income of sellers and service providers and report it to the State Tax Service. This tax will consist of 5% personal income tax (PIT) and 5% military duty.
The document was one of Ukraine’s obligations to international partners, in accordance with the memorandum with the IMF. This is one of three bills that were identified as a priority – without it, the IMF could refuse to allocate further tranches.
241 deputies voted for him. The opposition factions Batkivshchyna and European Solidarity did not give a single vote.
Criticism
The Ministry of Finance claims that participants in the digital platform market “publicly support this approach and note that the introduction of uniform reporting rules will help increase trust between the state, business and users, as well as the formation of a predictable regulatory environment.” Finance Minister Sergei Marchenko also states that business was involved in the development of the document and fully supported the initiative.
At the same time, there are predictions that the levy of a tax will lead to higher prices for services and goods on the Internet.
Also, the draft law did not have sufficient support in the session hall for a long time, since some deputies believed that the tax could become additional pressure on some sellers – ordinary citizens for whom trade is not their main activity.
“People sell their last used items through the OLX platform. Tell me, please, is this the state’s last resource? In a warring country where more than 80% of people live below the poverty line, let’s impose these taxes on the poorest,” said Batkivshchyna leader Yulia Tymoshenko, calling such intentions “bullshit” and “the last level of genocide.”
However, in recent months, significant changes have been made to this bill, aimed specifically at protecting ordinary sellers, and not those who evaded taxes by using business trading platforms. In total, people's deputies submitted about 3.5 thousand amendments to the second reading.
Will I have to pay more?
The Ministry of Finance claims that small sellers will not have to. The bill sets a tax-free threshold of €2 thousand per year, with no limit on the number of sales. Simply put, if you sold goods worth less than €2 thousand per year (about 104 thousand UAH), your income will not be taxed.
If you exceed this threshold, then, according to the Ministry of Finance, the tax rate will still be lower than now. According to the new rules, there will be a single tax payment of 10% (but provided that the annual income does not exceed 834 minimum wages, that is, UAH 7.2 million, and the person does not sell excisable goods). For comparison: under the current system, the tax burden on personal income is 23% (personal income tax + military duty).
As explained in the Judicial-Legal Gazette, the new rules clearly distinguish between entrepreneurial activity and personal sales on the Internet. If the user is registered on the platform as an individual entrepreneur, the service operator will not withhold taxes from him, since the entrepreneur pays them independently at his own rate. At the same time, income of individuals from the sale of goods through online platforms in the amount of up to €2 thousand per year is completely exempt from taxation.
When will it work and why is all this needed?
The document must still be signed by the head of the Verkhovna Rada and the president. Most of the provisions will come into force on January 1, 2027, when taxation under the new rules will begin.
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The Ministry of Finance believes that reducing the rate to 10% should stimulate the withdrawal of income from the shadows.
“In Ukraine, even before the full-scale war, there were about 1 million people who worked unofficially – as couriers, taxi drivers, provided services through some kind of Kabanchik or other platforms, traded through the same OLX – without registering as entrepreneurs… It would be good if they paid at least some taxes on their income,” Vladimir, senior economist at the Center for Socio-Economic Research CASE Ukraine, told BBC News Ukraine Dubrovsky.
According to preliminary estimates, about 400 thousand people now earn money on digital platforms in Ukraine. The Ministry of Finance expects that the new rules will provide the state budget with approximately UAH 14 billion annually.
