Accounting of expenses defrayed via online payment systems

While the procedure for accounting of revenue received through the electronic payment systems is quite clear, the accounting of expenses resulting from online transactions remains a serious problem. As noted earlier, electronic payment systems, in particular Webmoney, have some financial features that are associated with the principle of receivables and, as a consequence, the debt trade for money.

The accounting of expenses resulting from online transactions through such payment systems as Webmoney, PayPal, Yandex.Money, etc. can also play an important role for individuals who are not private entrepreneurs. The Tax Code of Ukraine provides for certain preferential advantages for personal income tax, for example, when receiving education or medical services. According to sub-item 166.3.3, item 166.3 of Article 166 of the Tax Code of Ukraine, the taxpayer shall be eligible for including into the tax discount the the amount of funds paid to educational establishments for the compensation for the cost of the secondary vocational or higher education of such a taxable person and/or a first-degree member of his family who does not receive a salary. Such a person is required to have documents confirming the cost of education, including payment documents of the Webmoney system, as well as the fact of education in the Ukrainian educational institution. According to the norms of the current legislation, it is very challenging to conclude an Educational Services Agreement, which provides for electronic payments. However, if the price and amount of the Agreement is specified in hryvnia, you can pay through electronic payment systems, given that the institution complies with the relevant requirements of the law, for example, uses a general system of taxation. Accordingly, the incurred expenses may be included in the tax discount. A similar mechanism can be applied to the cost of paid services associated with the treatment. It is important to remember that health care services, that can be included in the tax discount, are defined by the Tax Code of Ukraine, and they should be provided only by a resident.

Business entities using the simplified taxation system are not entitled to use electronic payments for their settlements. This follows from item 291.6 of Article 291 of the Tax Code of Ukraine.  

The State Fiscal Service of Ukraine indicates that this provision applies to all settlements between the single taxpayers and buyers/suppliers.

The accounting of electronic payments made by business entities operating under the general taxation system to suppliers of goods or services is also a very important issue. In this case, the legislation does not prohibit this form of settlement, and accordingly, the incurred expenses affect the base of VAT and income tax or personal income tax.   

The mandatory requirement established by the Tax Code is availability of documents confirming expenses. The basis for inclusion in the tax discount is the tax invoice issued by the supplier and entered in the register of tax invoices, and the document confirming the electronic payment. In addition, the seller must also provide the buyer with other documents: an invoice, a delivery note, a shipping document, a bill of lading, a service acceptance act, etc.  On the basis of these documents, a business entity has the right to include online transactions in expenses, thereby reducing taxable income.

Publication date: 23/12/2014

About author

Name: Volodymyr Gurlov

Position: Partner

Education: National Academy of the Security Service of Ukraine

Knowledge of languages: Russian, Ukrainian, English

Email: [email protected]

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