Peculiarities of agreements stipulating payment via e-commerce payment system
The use of various electronic payment systems has gained an increased popularity in recent years. Webmoney, PayPal, Qiwi, Yandex.Money is by no means an exhaustive list of electronic payment systems. Ease of use and fast settlements on accounts between the partners from different countries make the above-named payment systems very popular in Ukraine. However, there are some nuances of domestic legislation, which are crucial for the legitimate use of these payment instruments.
The issue related to the lawful use of electronic payment systems (PayPal, etc.) is of particular interest to directors of legal entities and private entrepreneurs intending to use these systems in their business activities. The main question is how to conclude an agreement with a counterparty that will provide for making payments through an electronic payment system, such as Webmoney.
According to Article 181 of the Economic Code of Ukraine, an agreement between business entities shall be concluded in writing. And it does not matter whether one of the parties is a non-resident. Article 6 of the Law of Ukraine “On Foreign Economic Activity” suggests that the foreign economic agreement shall be also drawn up in writing. When concluding the agreement, the parties shall agree on the subject matter, price and duration of the agreement. Agreements between Ukrainian business entities shall be made in the currency of Ukrainian Hryvnia (UAH), and in case of foreign economic agreements, settlements on accounts may be made in foreign currency.
The provisions of the Law of Ukraine “On Payment Systems and Funds Transfers in Ukraine” (Article 3) stipulate that funds can be in cash form (in the form of banknotes) or in non-cash form (in the form of entries in bank accounts). The only legal currency in Ukraine used for transfers and payments is Ukrainian Hryvnia. A similar provision can be found in Article 192 of the Civil Code of Ukraine. According to the Tax Code of Ukraine (para. 14.1.93), funds shall be understood as Ukrainian Hryvnia or foreign currency.
Based on the provisions of the current laws and regulations, the price of the agreement between economic entities may be specified in Ukrainian Hryvnia (UAH) or foreign currency. The law as it currently stands does not provide for specifying the price in electronic currencies of electronic payment systems, such as WMZ, WMU, etc.
At the same time, Ukrainian legislation does not expressly prohibit to specify a method for settlements through electronic payment systems in economic agreements. Therefore, the parties to the agreement may theoretically provide for making payments via Webmoney or PayPal, specifying the price and total amount in Ukrainian Hryvnia or foreign currency in the agreement. However, it is necessary to take into account the position of the state authorities in respect of making payments via electronic payment systems. For example, the State Fiscal Service of Ukraine believes that such payments are not a monetary form, which therefore require a different tax assessment method. In addition, the documents on payments via the above mentioned systems may be refused as documentary proof of expenses of a business entity.
The agreement concluded by and between a natural person and a sole proprietor is subject to the same rules as the agreement concluded by and between business entities and, accordingly, it will be problematic to conclude a legitimate agreement that provides for making payments via Webmoney or PayPal.
When making payments to a natural person, one may be faced with problems related to the accrual and withholding of personal income tax (for example, it can be difficult to correctly determine the tax deduction basis as of the date of payment, etc.).
In order to avoid problems with regulatory authorities, it is advisable not to conclude agreements between partners that provide for making payments through electronic payment systems.
Natural persons can more freely take advantage of making payments through electronic payment systems. In this case, the agreement may provide for making payments through electronic payment systems, but the agreement price shall be specified in Ukrainian Hryvnia or foreign currency. In addition, a number of transactions between natural persons can be concluded in verbal form (Article 206 of the Civil Code of Ukraine). The recipient of funds is obliged to declare the income received and pay personal income tax at the rate of 15% or 17%, depending on the amount of income.