Payment systems such as Wise, Payoneer, Revolut, etc. positioned by electronic money institutions. However, using such payment systems had significant risks for the taxpayer in the simplified taxation system. For example, after carrying out operations using payment systems that work through the model of electronic money, the FOP of the III group from the next tax period (quarter) would have to switch to the general taxation system and pay by the end of the year no longer 5% of the single tax, but 18% personal income tax and 1.5% of the military levy on income from his business activities, and additionally tax the funds received from this method of calculation at the rate of 15% by paragraphs 3 clauses 293.4 of Art. 293 of the Tax Code of Ukraine (from now on referred to as the Tax Code of Ukraine).
The specified problem arose because, according to clause 291.6 of Art. 291 of the Code of Ukraine, payers of the single tax of groups I-III were obliged to use the monetary form of payment exclusively. Therefore, failure to comply with the specified provision in Clause 4 of Article 298.2.3. 298 of the Criminal Code of Ukraine is the basis for the obligation of the single tax payer to switch to the payment of other taxes and fees.
Settlements using electronic money were considered non-monetary transactions. The letter of the National Bank of Ukraine, “On the peculiarities of transactions with electronic money,” dated February 7, 2014, No. 25-109/5294, stated:
“… electronic money is also issued by banks other than the National Bank of Ukraine; it is an electronic substitute for banknotes and coins and a monetary obligation of the issuer. Electronic money is used as a means of making payments, is accepted by a limited number of persons, is provided by the issuer in exchange for funds in cash or non-cash form and, according to the laws of Ukraine, is not currency valued and money.”
The specified situation has changed with implementation of the Law of Ukraine “On Payment Services” dated June 30, 2021, No. 1591-IX. The law entered into force on 01.08.2021 and was put into effect on 01.08.2022. Article 3 of the said law defines:
“Money for this Law also includes electronic and digital money in the cases provided for by this Law. Electronic money and digital money exist only in non-cash form.”
Thus, crediting funds to an account in a payment institution is a form of non-cash settlement. What excludes the possibility of demanding a) to tax the income received on a corporate (business) account in the payment system at a rate of 15% based on paragraphs? 3 clause 293.4 of Art. 293 of the Criminal Code of Ukraine, and b) to pay other taxes and fees based on paragraphs Clause 4 of Article 298.2.3. 298 of the PC of Ukraine.
But the use of payment systems for single taxpayers remains risky. This is due to two reasons:
Under Clause 16 of the Regulation on protection measures and determining the procedure for carrying out certain operations in foreign currency, approved by the Resolution of the Board of the National Bank of Ukraine dated 02.01.2019 No. 5, settlements for foreign economic operations are carried out exclusively through bank accounts, Wise, Payoneer, and Revolut are payment systems (e-money institutions) that do not have a license to carry out banking activities directly.
The State Tax Service of Ukraine took the position that the funds that the taxpayer receives on a foreign account should be credited to the corporate version of the business entity in a Ukrainian bank and otherwise be taxed as the income of a natural person on general grounds. We believe this position is not correctly reasoned based on the provisions of the current legislation.
Therefore, using payment systems operating through the model of electronic money to receive remuneration from single taxpayers for services rendered or work performed by them remains risky. However, the obligation to switch to paying other taxes and fees does not arise when using such payment systems.