Previously, until January of this year, the tax authorities were not in favor of entrepreneurs. The tax office considered funds received into foreign accounts and international payment systems to be considered as personal funds of an individual (not an entrepreneur) and subject to a personal income tax (PIT) rate of 18%.
Now, there is an official clarification from the tax authorities in favor of businesses:
if funds received from foreign economic activities are credited to an account opened in the Payoneer and WISE systems and then transferred to accounts opened in Ukrainian banks for entrepreneurial activities, these funds are considered as income of the individual entrepreneur subject to the unified tax and taxed according to the rules defined in Chapter 1 “Simplified Taxation, Accounting, and Reporting System” of Chapter XIV of the Tax Code of Ukraine.
However, if these funds remain in the Payoneer and WISE systems at the end of the reporting tax period, i.e., they are not transferred to accounts opened in Ukrainian banks for entrepreneurial activities or transferred to accounts in Ukraine opened for personal purposes, then these funds are taxed according to the rules established for taxpayers – individuals, at the standard PIT rate of 18%.
In summary:
- Funds received by FOP in the Payoneer or WISE payment systems, which will be transferred to the FOP’s bank account in Ukraine during the financial year, will be taxed at a rate of 5% for the third group.
- Funds not transferred during the financial year to the FOP’s bank account or transferred to a private individual’s bank account will be subject to taxation at the standard PIT rate of 18%.
