Analysis of the draft law:
Analysis of the Draft Law on Amendments to the Tax Code of Ukraine and the Law of Ukraine “On Banks and Banking Activities”
Essence of the draft law: The draft law aims to implement the international standard for the automatic exchange of information on income received through digital platforms, known as the Multilateral Competent Authority Agreement (MCAA). It defines terms and rules for platform operators, sellers, and regulatory authorities. The draft introduces new reporting requirements for platform operators and establishes specific taxation rules for income received by individuals through these platforms. Additionally, it provides for the exchange of information with foreign jurisdictions to ensure tax transparency. The law introduces liability for violations of the new rules, including fines.
Structure of the draft law:
- Section I – Amendments to the Tax Code of Ukraine:
- Definition of terms related to digital platforms and reporting.
- Establishment of requirements for platform operators regarding the collection and transfer of information about sellers’ income.
- Implementation of rules for taxation of income received by individuals through digital platforms.
- Determination of the procedure for accounting and control over platform operators.
- Establishment of liability for violations of reporting requirements and identification of reportable sellers.
- Section II – Amendments to the Law of Ukraine “On Banks and Banking Activities”:
- Expansion of the list of information disclosed by banks upon request from regulatory authorities, including data on transactions in the current accounts of reportable sellers.
- Section III – Final Provisions:
- Determination of the date of entry into force of the law and its individual provisions.
- Establishment of transitional provisions regarding the timing of bringing regulatory legal acts into compliance with the law.
Main provisions and changes:
- Definition of key terms: New terms are introduced, such as “platform,” “platform operator,” “reportable seller,” “reportable activity,” and others, which are key to the application of the law.
- Obligations of platform operators: Platform operators are obligated to collect, verify, and transmit information about the income of reportable sellers to regulatory authorities. Requirements are established for proper due diligence of sellers.
- Taxation of individual income: Specifics are established for the taxation of income received by individuals from carrying out reportable activities through digital platforms. The possibility of applying a preferential tax rate is provided, subject to the fulfillment of certain requirements.
- Responsibility: Penalties are introduced for failure to submit, late submission, or submission of inaccurate information by platform operators.
- Information exchange: The law provides for the exchange of information with the competent authorities of foreign jurisdictions in accordance with international agreements.
- Amendments to the Law “On Banks and Banking Activities”: Regulatory authorities are granted the right to receive information from banks about transactions on the accounts of reportable sellers.
Main provisions important for different groups:
- Legislators: The need to harmonize Ukrainian legislation with international standards, in particular the Multilateral Competent Authority Agreement (MCAA).
- Experts: New definitions and requirements regarding reporting and taxation that require detailed analysis and clarification.
- Business: New obligations for platform operators related to the collection and transmission of information, which may require adaptation of business processes.
- Citizens: Changes in the taxation of income received through digital platforms, which may affect their financial obligations.
Analysis of the explanatory note:
Analysis of the Draft Law of Ukraine on Taxation of Income through Digital Platforms
Essence of the draft law
The draft law aims to implement the international automatic exchange of information on income received through digital platforms and to harmonize Ukrainian tax legislation with the norms of the European Union and the Organisation for Economic Co-operation and Development (OECD). This is necessary to fulfill Ukraine’s international obligations and create transparent conditions for the taxation of income received through digital platforms.
Reasons for and necessity of adopting the draft law
According to the explanatory note, the main reasons are:
- Ukraine’s international obligations under the Memorandum with the IMF and the National Revenue Strategy of Ukraine.
- The need to implement the OECD Model Rules and Council Directive (EU) 2021/514 (DAC7 Directive) for the automatic exchange of information on income.
- Creating legal conditions for transparent taxation of income received by individuals through digital platforms.
Main consequences of the draft law
The most important consequences of this draft law are:
- For legislators: The need to bring national legislation into compliance with international standards and obligations, in particular regarding the exchange of information for tax purposes. Ensuring the implementation of the Legislative Work Plan of the Verkhovna Rada of Ukraine.
- For experts: There will be a need to analyze and clarify the new rules for reporting and taxation of income received through digital platforms. The need to monitor the effectiveness of the implementation of new rules and their impact on tax revenues.
- For business (digital platform operators): Introduction of new obligations regarding the collection and submission of information on the income of sellers on platforms. The need to adapt internal processes to comply with due diligence and reporting requirements. Establishing liability for violations of the requirements for identifying reportable sellers and submitting reports.
- For citizens (sellers on platforms): The opportunity arises to pay tax at a rate of 5% under certain conditions (age from 18 years, opening a special account, annual income up to UAH 7.2 million, no employees, etc.). Income from the sale of goods up to EUR 2,000 per year is not included in taxable income. The need to declare income received through digital platforms and the possibility of control by the State Tax Service over transactions on accounts.
These changes are aimed at increasing the transparency of the tax system, stimulating the declaration of income, and ensuring the fulfillment of Ukraine’s international obligations.
Analysis of other documents:
It seems I can analyze the provided documents.
Analysis of the Resolution of the Verkhovna Rada of Ukraine and the List of Acts to the Draft Law
1. Position of the author (Cabinet of Ministers of Ukraine):
From the text of the Resolution of the Verkhovna Rada of Ukraine, it is clear that the Cabinet of Ministers of Ukraine is the initiator of the Draft Law “On Amendments to the Tax Code of Ukraine and the Law of Ukraine “On Banks and Banking Activities” regarding the implementation of the international automatic exchange of information on income received through digital platforms and taxation of such income.” The Cabinet asks the Verkhovna Rada to adopt this draft as a basis for further consideration.
2. Main provisions of documents important for various stakeholders:
These documents relate to procedural issues related to the implementation of the law, namely:
- Resolution of the Verkhovna Rada of Ukraine: This is actually a signal that the bill will be considered by parliament. It is important that the Committee on Finance, Tax and Customs Policy finalize the bill, taking into account the comments. This means that it is possible to make changes and adjustments to the final version.
- List of acts of central executive bodies: This list is very important because it shows exactly which regulatory acts must be adopted or revised to implement the provisions of the bill. The most important points:
- Deadlines: Most acts must be adopted within six months from the date of entry into force of the Law. This is important for businesses and citizens as it determines the timing when the new rules will take effect.
- Responsible authorities: The Ministry of Finance of Ukraine and the State Tax Service of Ukraine are the main bodies responsible for preparing these acts. This means that these bodies will determine the specific mechanisms for implementing the law.
- Complaints and tax notices: A significant part of the changes concerns the procedure for appealing tax notices for non-resident organizations that are platform operators. This is important for international businesses operating in Ukraine.
- Electronic identification and accounting: Procedures for electronic identification and accounting of platform operators are established. This is important for regulatory authorities and ensuring transparency.
- Reporting: Reporting forms on the income of reportable sellers are established, which is key to the automatic exchange of information.
- Personal Income Tax (reportable sellers): Rules are established for the taxation of income received by individuals through platforms, in particular, if the amount of income for the year does not exceed the equivalent of EUR 2,000 (non-taxable income).
Who is this important for:
- Legislators: Must understand what additional steps are needed for the full implementation of the law.
- Experts: Can assess how fully and qualitatively the list of necessary changes to regulatory acts has been prepared.
- Business: Must be prepared for changes in accounting and reporting, especially for digital platforms and their operators.
- Citizens: Should be aware of the new rules for taxation of income received through digital platforms, as well as the possibility of appealing tax notices.
In summary, these documents are important for understanding the process of implementing the law and its impact on various stakeholders.
