Ukraine: Proposed legislation for digital platform reporting and withholding tax requirements
The bill would require digital platform operators to report relevant tax information on sellers and income generated through their platforms.
The Ukrainian Cabinet of Ministers has announced legislation (Ukrainian) proposing to implement the Multilateral Competent Authority Agreement on Automatic Exchange of Information on Income Derived Through Digital Platforms (DPI MCAA). This bill also introduces an income tax withholding obligation for digital platforms.
As of November 26, 2024, 29 countries and counting have committed to implementing information reporting obligations on digital platforms by adopting the OECD’s Model Reporting Rules (MRR), including EU countries under DAC7. It appears that, while Ukraine has not specifically become a signatory to MCAA, it intends to adopt a regime based on the MRR, with the additional feature of introducing an income tax withholding requirement. The bill is expected to be submitted to the Ukrainian parliament by the end of April 2025. If adopted, the law would come into effect the day after its publication.
Information reporting requirements
Scope
The bill would require digital platform operators to report relevant tax information on sellers and income generated through their platforms. The first reporting period would begin January 1, 2026, and end December 31, 2026.
It defines a digital platform as any software, including a website, its part, or applications (including mobile applications), that is accessible to users and allows sellers of goods and services to communicate with other users to directly or indirectly conduct reportable activities for such users. Transactions provided by the platform may also include the collection, calculation, and payment (crediting) of rewards for reportable activities. The term "platform" does not include software that does not affect the ability to conduct reportable activities and provides for the execution of exclusively any of the following operations: processing of payments made in relation to reportable activities; informing about or advertising reportable activities for users; redirecting or transferring users to the platform.
The regime would apply to digital platforms that are tax residents, established, or have an effective place of management in Ukraine. It would also apply to platforms that are tax residents, established, or have an effective place of management outside the DPI-MCAA member states, or those within DPI-MCAA member states that do not exchange information on digital platforms with Ukraine, or have permanent establishments in Ukraine. This applies if these platforms enable Ukrainian individuals to (1) lease any immovable property (such as residential, non-residential, parking spaces, etc.), (2) provide personal services, (3) sell goods, or (4) lease vehicles.
However, a digital platform would be excluded from these obligations if it, subject to procedural requirements, annually confirms to the tax authorities that its business model ensures the absence of reportable sellers/transactions among the platform users.
Registration and compliance
Covered platform operators would be obliged to apply for registration within 60 calendar days after establishing their status as a covered platform.
It would also require covered platforms to conduct comprehensive verification of sellers so that they are accurately identified and classified.
Penalties
Failure to apply for registration entails the imposition of a fine in the amount of 20 times the minimum wage established by law on January 1 of the reporting (tax) year.
Payment of such a fine does not exempt the reportable platform operator from the obligation to register and comply with other requirements of the regime.
Income tax withholding requirements
Further, the bill would also provide that digital platforms must withhold and report income tax for Ukrainian individuals earning income through these platforms.
Income earned by Ukrainian individuals from these activities via digital platforms could be subject to a reduced 5% individual (personal) income tax and the regular 5% military tax, provided the digital platform complies with Ukrainian tax requirements and the following conditions are met:
- The individual has at least one current account opened specifically for these activities and notifies each platform operator of the account details
- The individual receives payments exclusively in monetary form through the specified current account
- The individual is not subject to any special economic or other restrictive measures (sanctions) as established by law
- The individual is not a self-employed person according to the Ukrainian tax code
- The individual has no employees
- The individual does not sell excisable goods
- The individual's income from these activities does not exceed UAH 5 million per calendar year
Finally, the bill proposes to establish an extended statutory limitation period of five years (1,825 days) for digital platforms or an unlimited period if no tax reporting is submitted by the respective digital platform.
Contact us
For more information, contact a KPMG tax professional:
Philippe Stephanny | philippestephanny@kpmg.com
Chinedu Nwachukwu | chinedunwachukwu@kpmg.com
Denys Pyshniuk I dpyshniuk@kpmg.ua