Determination of income by the sole proprietor when receiving funds through PAYONEER and WISE

What date is considered to be the date of receipt of income by a sole proprietor - payer of the single tax if the funds received from foreign economic activity are credited to an account opened in the PAYONEER and WISE systems and transferred during the reporting period, but not later than the annual tax (reporting) period, to an account opened in a banking institution in Ukraine for the purpose of conducting business?

Part 2 of Article 5 of the Law of Ukraine No. 959-XII dated April 16, 1991 "On Foreign Economic Activity" stipulates, inter alia, that individuals with permanent residence in Ukraine have the right to carry out foreign economic activity if they are registered as entrepreneurs in accordance with the procedure established by law.

Relationships arising in the area of currency transactions, currency regulation and currency supervision are governed by the Constitution of Ukraine dated June 28, 1996 No. 254к/96-ВР, the Law of Ukraine dated June 21, 2018 No. 2473-VIII "On Currency and Currency Transactions" (hereinafter - Law No. 2473), other laws of Ukraine, as well as regulations of the NBU adopted in accordance with Law No. 2473.

The principles of currency regulation set forth in Article 2 of Law No. 2473 provide, inter alia, for the right of resident individuals and legal entities to enter into transactions with residents and/or non-residents and to fulfill obligations related to these transactions in the national currency or in foreign currency, including opening accounts in financial institutions of other countries.

Pursuant to Article 4(3)(1) of Law No. 2473, residents, subject to the restrictions set forth in Law No. 2473 and other laws of Ukraine, have the right to open accounts in foreign financial institutions and to conduct foreign exchange transactions through such accounts.

The procedure for opening accounts in foreign financial institutions is governed by the laws of the country in which the account is opened.

The NBU determines the procedure for settlements under foreign exchange transactions (part four of Article 5 of Law No. 2473).

In accordance with the first paragraph of clause 16 of section. I of the Regulation on Measures of Protection and Determination of the Procedure for Certain Transactions in Foreign Currency, approved by Resolution of the NBU Board No. 5 dated January 2, 2019 (hereinafter - Regulation No. 5), settlements under foreign economic transactions are made exclusively through bank accounts.

Paragraph 23 of Section II of Regulation No. 5 provides that funds from a non-resident under the resident's export of goods shall be credited to the resident's account in Ukraine in a bank.

It should be noted that PAYONEER is an international payment system and WISE is an international money transfer system, and therefore accounts opened in these systems are not considered accounts opened in banking institutions.

The procedure for the application of the simplified taxation, accounting and reporting system, as well as the collection of the single tax, is set forth in Chapter 1 of Section XIV of the TCU.

Pursuant to clause 292.1 of the TCU, income for an individual entrepreneur is income received during the tax (reporting) period in monetary form (cash and/or non-cash); tangible or intangible form as defined by clause 292.3 of the TCU.

At the same time, income does not include passive income received by such an individual in the form of interest, dividends, royalties, insurance payments and reimbursements, income in the form of budget grants, as well as income received from the sale of movable and immovable property owned by an individual and used in his or her business activities.

Income denominated in foreign currency is translated into hryvnias at the official hryvnia to foreign currency exchange rate set by the NBU on the date of receipt of such income (clause 292.5 of the TCU).

The date of receipt of income of a single tax payer is the date of receipt of funds by the single tax payer in monetary (cash or non-cash) form, the date of signing by the single tax payer of the act of acceptance and transfer of goods (works, services) received free of charge (clause 292.6 of the TCU).

Pursuant to the first paragraph of clause 296.2 of the TCU, single tax payers of the first and second groups shall submit to the supervisory authority a single tax return within the time limit established for the annual tax (reporting) period, which reflects the amount of income received, monthly advance payments as defined in clause 295.1 of the TCU, as well as information on the amount of the single contribution to the obligatory state social insurance accrued, calculated and paid in accordance with the procedure established by law for this category of taxpayers.

Single taxpayers of the third group submit a single tax return to the supervisory authority within the time limits established for the quarterly tax (reporting) period (paragraph 1 of clause 296.3 of the TCU).

Taking into account the above, the date of receipt of income by an individual entrepreneur - single tax payer, if the funds received from foreign economic activity are credited to an account opened in the PAYONEER and WISE systems and during the reporting period, but not later than the annual tax (reporting) period, are transferred to an account opened in a banking institution in Ukraine for business activities, is the date of receipt of funds to the account opened in the PAYONEER and WISE systems.

In this case, income denominated in foreign currency is converted into hryvnia at the official exchange rate of hryvnia to foreign currencies set by the NBU on the date of its receipt in the PAYONEER and WISE systems.