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Tax accounting of income received by means of online payment systems

  • Author: Volodymyr Gurlov
  • Legal Practices: Taxation
  • Date of publication: 18/12/14

Despite the present difficulties, payments through online payment systems are often used when buying and selling goods via the Internet. Therefore, business entities and natural persons, practicing this form of payment, have faced the issues of accounting for income and expenses for the purpose of further taxation.

To determine the amount of income received in the form of online payments, for example, through the WebMoney system, the recipient must keep appropriate records. The income in the form of payments through online payment systems can be received by business entities (legal entities and private entrepreneurs) and natural persons who are not business entities.

Resident natural persons who receive unsystematic income in the form of online payments, i.e. trade or provide services no more than three times a year, include these payments in taxable income and indicate it in the annual declaration, which is submitted to the tax authorities before May 1 of the year following the reporting year. The income received in the form of onlinу payments is taxed on personal income at a rate of 15%, and with an income of more than 10 minimum wages - 17%.

The financial and economic activities of business entities require not only full accounting of the income received but also the correct record-keeping. Along with payment documents, documents that confirm the shipment of goods and materials or the provision of services, tax invoices, etc. are important for accounting and tax accounting. It is on the basis of all documents prescribed by law that legal entities and private entrepreneurs, applying the general taxation system, should set forth the income received through online payment systems in the accounting and tax registers. For each payment, a self-employed person should have a set of documents (a contract, an invoice, a  tax invoice, a payment document). The rates of VAT and income tax will depend on the type of products sold or services rendered. Selling software products is exempt from VAT (Article 26-1 of subsection 2 of section XX of the Tax Code), and the profit tax rate is 5% (article 10 of subsection 4 of section XX). A prerequisite for applying these benefits is the registration of the taxpayer as an entity that uses a special taxation procedure. In this case, the legal entity must meet certain criteria, specified in Art. 15 subsection 10 of section XX of the Tax Code of Ukraine.

Due to the financial nature of the system of online payments such as Webmoney, when calculating through them, the first event will always be the shipment or entry of goods, works or services into the books. Accordingly, on this fact, tax obligations of the seller should be set forth and the buyer should have the right to a VAT tax credit if there is a properly drawn up tax invoice.

Business entities that are on a simplified taxation system, based on paragraph 291.6 of Article 291 of the Tax Code, must only make payments in cash and, accordingly, cannot receive income in the form of online payments. However, there are situations when single tax payers have such income. In this case, for private entrepreneurs, all income received using online payment systems is taxed at a rate of 15%, and for legal entities, such income is taxed at a double single tax rate. At the same time, such single tax payers must switch to the general taxation system from the month following the tax period when income is received in the form of online payments (paragraph 4 of clause 298.2.3 of the Tax Code).

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