The Cabinet of Ministers is revising the rules on e-commerce: what the new tax bills will change

This was announced by MP Yaroslav Zheleznyak, who published the texts of the documents and comparative tables.

This concerns a revised version of the Ministry of Finance’s initiative regarding sweeping changes to the Tax Code, which was previously discussed as a single bill. It has now been split into three parts, and is expected to be brought before the Verkhovna Rada in early April.

Taxation of parcels and e-commerce

The draft legislation on e-commerce taxation effectively changes the approach to the import of goods via postal and express deliveries.

Key changes:

• The concept of ‘distance selling of goods’ is introduced, and taxation is linked to such transactions;
• In a number of cases, the VAT payer is not the buyer but the platform or intermediary through which the sale is made;
• The point at which the tax liability arises is shifted to the stage of payment or delivery via the platform;
• VAT applies to goods in international shipments, even if they are supplied via e-commerce;
• The tax base is determined by the invoice value of the goods, including delivery;
• A new approach to the tax-free threshold is introduced – exemptions are restricted, and certain categories of goods (alcohol, tobacco, etc.) are excluded from the simplified regime.

In effect, Ukraine is moving towards a model where taxes on imports of small parcels are administered via marketplaces and operators.

Digital platforms: reporting and data exchange

The second draft law implements international rules on the automatic exchange of information on income from digital platforms (DPI).

Key changes:

• The terms ‘platform operator’ and ‘reportable seller’ are defined;
• Platforms are required to collect, verify and transmit data on sellers’ income to the tax authorities;
• Annual reporting on income received by individuals and businesses via platforms is introduced;
• Platforms may act as tax agents – withholding and remitting taxes;
• Penalties are introduced for failure to submit reports or for errors in reporting;
• Automatic international exchange of this information between tax authorities is provided for.

It is specifically stipulated that reportable activities include, in particular: the sale of goods, property rental and transport services.

Military levy: continuation after the war

The third draft law changes the approach to the duration of the military levy.

Key changes:

• the military levy will remain in force not only during martial law but also until the end of the third year following its conclusion;
• the rate remains at 1.5% for most taxpayers;
• the levy will continue to apply to the income of individuals, sole traders and other categories of taxpayers;
• it is included in the calculation of the total tax burden for certain groups of single tax payers.

It should be noted that, as part of this tax reform, the introduction of VAT for sole traders with a threshold increase to UAH 4 million was also considered; however, it has been decided to postpone this provision for the time being.