How Ukrainian freelancer to work legally
Many freelancers earn on foreign exchanges and use international payment systems. How to work on freelancing in Ukraine so that there are no problems with the law?
Working on the online freelance market, the majority of Ukrainian independent experts rarely think about the legal aspects of their activities. No wonder, because the official registration bears a lot of difficulties in the design and the need to pay taxes. Since the history of Ukrainian legislation does not know of any serious negative consequences of unregistered freelancers, most Ukrainians prefer not to play in the open, explaining that the amount of earnings on freelancing is not commensurate with the administrative offenses of a small business. International freelance platform for language professionals 2Polyglot.com decided to understand the professional activities of freelancers in Ukraine in terms of legislation.
')
Receiving funds on a regular basis for the performance of services, the freelancer essentially conducts business activities that are prohibited without official registration. According to Article 164 of the ALCO (Code of Ukraine on Administrative Offenses), unregistered business activity leads to the imposition of a fine of up to UAH 8500, as well as confiscation of all funds received as a result of this activity. Here it is necessary to distinguish the term “collection” from “confiscation”, which assumes that money earned on freelance will be taken away from the entrepreneur, respectively, in the case when these funds have already been spent, it will no longer be possible to confiscate them.
According to section IV p.167.1 of the Tax Code of Ukraine (TCU), even without registering business activities, receiving income, a citizen of Ukraine is obliged to pay 18% of personal income tax (personal income tax rate from 01/01/2016). In case of non-payment of income tax, or, more correctly, if the freelancer is found to have failed to pay this tax, he will have to pay this tax and, moreover, a penalty of 25% of the amount of this tax. If the amount of income tax, which the freelancer did not pay, reaches thousands of non-taxable minimum incomes of citizens of 689x1000 = 689,000 UAH, then the independent specialist is already facing criminal liability, which can be disposed of by paying the tax with the same 25% fine (part 4 of 212 of the Criminal Code of Ukraine).
By registering as FL-P and becoming a third single tax group, the Ukrainian freelancer will be able to pay only 5% of the total turnover of all funds. You can also select a group by first calculating your possible income.
Also, a freelancer who is an entrepreneur in this situation is obliged to pay a single social contribution (ERU), which is equal to 22% of the amount of the minimum wage (January-April 2016 = 1378 * 0.22 = 303.16 UAH. May-November 2016 = 1450 * 0.22 = 319.00 UAH. December 2016: = 1550 * 0.22 = 341 UAH.).
According to clause 7.7 of instruction No. 492 of the National Bank of Ukraine (NBU) of November 12, 2013, it is prohibited to use the accounts of individuals for business activities. That is, according to the law, payments from activities on freelancing should be credited to the account of FL-P. This means that if, registering FL-P, to provide an extract from your personal card (an account of an individual), you will have to pay 18% of the income tax, and not 5% of the single tax.
According to the Ukrainian lawyer Nikita Polatayko , in Ukraine there are special state bodies (non-tax) that regularly receive information on financial transactions more than UAH 150,000 (the Law of Ukraine on preventing and counteracting the legalization (laundering) of proceeds from crime, financing of terrorism and financing the proliferation of weapons of mass destruction, article 15).
Until recently, receiving money by freelancers for their professional activities in Ukraine (as they used to do it - just to the card without any registration) from non-residents of the country was illegal. Independent specialists were required to conclude an agreement with the customer in writing, which had to be provided to the bank in order for it to get funds from a non-resident into the account of the contractor (Article 633, Article 642). Of course, few people did this, because it is easier for a client from the USA to find another freelancer than to exchange by mail contracts and acts of completed work.
It is also not an option to open an account in a foreign bank, because the NBU Resolution No. 485 of October 14, 2004 requires obtaining an individual license from the National Bank of Ukraine to open such an account. Clause 2 of Article 162 of the ALCO provides for a fine in the amount of UAH 51,000. For opening a foreign currency account abroad without a license.
In this regard, many freelancers will have a question, is it possible that using Payoneer debit cards so popular with freelancers in Ukraine is illegal? Yes and no. The Payoneer card is not an account, since Payoneer has one account - their own, and the card is the ability to use their account. According to representatives of customer support of the payment system, the Payoneer card is not tied to an account, but, in accordance with clause 1.3 of Chapter 1 of the NBU provision No. 485, an account is considered to be any account of a resident through which any foreign exchange transactions are performed.
According to paragraph 2 of the NBU resolution No. 365 dated 09/16/2013, banks are not allowed to credit funds in foreign currency to the current accounts of individuals. That is, freelancers in Ukraine, without registering their activities, cannot receive currency on their cards; instead, the bank converts them into hryvnias and accordingly earns it, but this is another story.
In this situation, it is not surprising that almost everyone used exactly the 1st option.
Based on the NBU letter No. 13-134 / 4580-9703 of September 29, 2005, the National Bank itself in May 2015 allowed the use of invoices instead of drawing up written agreements between a resident of Ukraine and a customer from another country. The law was not amended, but a correctly drawn up invoice in accordance with this letter to the NBU can be recognized as an act of work performed. That is, it is not necessary to draw up contracts and agreements with wet seals and signatures of both parties, all that is needed is an invoice and an accepted offer.
On February 16, 2016, the Resolution of the National Bank of Ukraine No. 65 on amendments to the Regulation on electronic money in Ukraine was issued. This resolution allows individuals in Ukraine to receive electronic money from non-residents using international payment systems. It seems that everything is fine, but here the keywords are “Physical Person”, and not Physical Person-Entrepreneur. Accordingly, for ordinary citizens, who occasionally will receive money via electronic payment systems from their relatives from another country, this is a good sign, but for freelancers who would like to carry out their professional activities in accordance with the law - not quite. An Individual Entrepreneur is not an individual, and therefore it is not entitled to use his entrepreneur account for transferring funds through international systems. By registering FL-P, the freelancer has the right to receive payment for the services only to his account of an individual, and not to the account of FL-P. And here is already included income tax nat. persons, which is 18% instead of 5%. That is, if the freelancer cooperates only with foreign clients, then the FL-P account remains completely unused, but it also implies a single tax + ERUs. But an independent specialist cannot fail to register FL-P, since he leads an entrepreneurial activity.
As you know, it is still impossible to receive payments by PayPal in Ukraine. But an initiative group was created in the country to introduce this payment system in order to provide Ukrainians with an opportunity not only to make, but also to receive payments from other countries to their PayPal accounts. Thanks to this initiative group led by Ilya Königstein , the very resolution of the NBU was issued that allows individuals to use international payment systems. NBU representatives have already held several meetings with PayPal management on the issue of full implementation of the payment system in Ukraine. Back in August 2015, at the request of PayPal , the NBU representatives drafted a document officially confirming the NBU’s intention to allow Ukrainians to receive payments through the payment system, but the so-called Letter of Comfort was sent to PayPal managers only in December. But despite this, the important decree number 65, which was discussed above, was still made. On March 2, a meeting took place between representatives of the NBU and PayPal , at which it turned out that PayPal does not yet see the expediency of introducing a payment system in the country.
Taking into account the latest changes in the legislation of Ukraine, a freelancer in order to officially conduct his professional activities on legal grounds using international electronic payment systems requires:
If you cooperate mainly with foreign customers and use international payment systems, and not the Invoice, then it is better to choose the 3rd single tax group FL-P, because if there is no income on the FL-P account, then take 5% not what
Working on the online freelance market, the majority of Ukrainian independent experts rarely think about the legal aspects of their activities. No wonder, because the official registration bears a lot of difficulties in the design and the need to pay taxes. Since the history of Ukrainian legislation does not know of any serious negative consequences of unregistered freelancers, most Ukrainians prefer not to play in the open, explaining that the amount of earnings on freelancing is not commensurate with the administrative offenses of a small business. International freelance platform for language professionals 2Polyglot.com decided to understand the professional activities of freelancers in Ukraine in terms of legislation.
Official clearance
')
Receiving funds on a regular basis for the performance of services, the freelancer essentially conducts business activities that are prohibited without official registration. According to Article 164 of the ALCO (Code of Ukraine on Administrative Offenses), unregistered business activity leads to the imposition of a fine of up to UAH 8500, as well as confiscation of all funds received as a result of this activity. Here it is necessary to distinguish the term “collection” from “confiscation”, which assumes that money earned on freelance will be taken away from the entrepreneur, respectively, in the case when these funds have already been spent, it will no longer be possible to confiscate them.
Registration of an individual entrepreneur (FL-P - FOP in Ukrainian)
According to section IV p.167.1 of the Tax Code of Ukraine (TCU), even without registering business activities, receiving income, a citizen of Ukraine is obliged to pay 18% of personal income tax (personal income tax rate from 01/01/2016). In case of non-payment of income tax, or, more correctly, if the freelancer is found to have failed to pay this tax, he will have to pay this tax and, moreover, a penalty of 25% of the amount of this tax. If the amount of income tax, which the freelancer did not pay, reaches thousands of non-taxable minimum incomes of citizens of 689x1000 = 689,000 UAH, then the independent specialist is already facing criminal liability, which can be disposed of by paying the tax with the same 25% fine (part 4 of 212 of the Criminal Code of Ukraine).
By registering as FL-P and becoming a third single tax group, the Ukrainian freelancer will be able to pay only 5% of the total turnover of all funds. You can also select a group by first calculating your possible income.
According to paragraph 2 of Art. 293 NKU, the single tax rate in 2016 is equal to:
- 1 group: 137.80 UAH;
- Group 2: UAH 275.60;
- Group 3: 5% of income - for non-payers of value added tax (VAT).
Also, a freelancer who is an entrepreneur in this situation is obliged to pay a single social contribution (ERU), which is equal to 22% of the amount of the minimum wage (January-April 2016 = 1378 * 0.22 = 303.16 UAH. May-November 2016 = 1450 * 0.22 = 319.00 UAH. December 2016: = 1550 * 0.22 = 341 UAH.).
According to clause 7.7 of instruction No. 492 of the National Bank of Ukraine (NBU) of November 12, 2013, it is prohibited to use the accounts of individuals for business activities. That is, according to the law, payments from activities on freelancing should be credited to the account of FL-P. This means that if, registering FL-P, to provide an extract from your personal card (an account of an individual), you will have to pay 18% of the income tax, and not 5% of the single tax.
According to the Ukrainian lawyer Nikita Polatayko , in Ukraine there are special state bodies (non-tax) that regularly receive information on financial transactions more than UAH 150,000 (the Law of Ukraine on preventing and counteracting the legalization (laundering) of proceeds from crime, financing of terrorism and financing the proliferation of weapons of mass destruction, article 15).
Withdrawal of funds
As it was
Until recently, receiving money by freelancers for their professional activities in Ukraine (as they used to do it - just to the card without any registration) from non-residents of the country was illegal. Independent specialists were required to conclude an agreement with the customer in writing, which had to be provided to the bank in order for it to get funds from a non-resident into the account of the contractor (Article 633, Article 642). Of course, few people did this, because it is easier for a client from the USA to find another freelancer than to exchange by mail contracts and acts of completed work.
It is also not an option to open an account in a foreign bank, because the NBU Resolution No. 485 of October 14, 2004 requires obtaining an individual license from the National Bank of Ukraine to open such an account. Clause 2 of Article 162 of the ALCO provides for a fine in the amount of UAH 51,000. For opening a foreign currency account abroad without a license.
In this regard, many freelancers will have a question, is it possible that using Payoneer debit cards so popular with freelancers in Ukraine is illegal? Yes and no. The Payoneer card is not an account, since Payoneer has one account - their own, and the card is the ability to use their account. According to representatives of customer support of the payment system, the Payoneer card is not tied to an account, but, in accordance with clause 1.3 of Chapter 1 of the NBU provision No. 485, an account is considered to be any account of a resident through which any foreign exchange transactions are performed.
According to paragraph 2 of the NBU resolution No. 365 dated 09/16/2013, banks are not allowed to credit funds in foreign currency to the current accounts of individuals. That is, freelancers in Ukraine, without registering their activities, cannot receive currency on their cards; instead, the bank converts them into hryvnias and accordingly earns it, but this is another story.
It turns out that Ukrainian freelancers had 3 options:
- Do not register anything under the aforementioned fines and use the Payoneer card (with foreign customers) or, if possible, transfer the money to a Ukrainian bank card with conversion into hryvnia without any reporting.
- Register FL-P and obtain a license from the NBU to open a foreign currency account abroad, open an account abroad, and from there transfer it to the Ukrainian account with the deduction of all bank fees. This option includes many long and complex organizational issues.
- Register FL-P and use payment systems, having previously exchanged written contracts and acts by mail with the customer (at the request of Article 6 and Article 1 of the Law on Foreign Economic Activity).
In this situation, it is not surprising that almost everyone used exactly the 1st option.
Based on the NBU letter No. 13-134 / 4580-9703 of September 29, 2005, the National Bank itself in May 2015 allowed the use of invoices instead of drawing up written agreements between a resident of Ukraine and a customer from another country. The law was not amended, but a correctly drawn up invoice in accordance with this letter to the NBU can be recognized as an act of work performed. That is, it is not necessary to draw up contracts and agreements with wet seals and signatures of both parties, all that is needed is an invoice and an accepted offer.
As it is
On February 16, 2016, the Resolution of the National Bank of Ukraine No. 65 on amendments to the Regulation on electronic money in Ukraine was issued. This resolution allows individuals in Ukraine to receive electronic money from non-residents using international payment systems. It seems that everything is fine, but here the keywords are “Physical Person”, and not Physical Person-Entrepreneur. Accordingly, for ordinary citizens, who occasionally will receive money via electronic payment systems from their relatives from another country, this is a good sign, but for freelancers who would like to carry out their professional activities in accordance with the law - not quite. An Individual Entrepreneur is not an individual, and therefore it is not entitled to use his entrepreneur account for transferring funds through international systems. By registering FL-P, the freelancer has the right to receive payment for the services only to his account of an individual, and not to the account of FL-P. And here is already included income tax nat. persons, which is 18% instead of 5%. That is, if the freelancer cooperates only with foreign clients, then the FL-P account remains completely unused, but it also implies a single tax + ERUs. But an independent specialist cannot fail to register FL-P, since he leads an entrepreneurial activity.
PayPal in Ukraine
As you know, it is still impossible to receive payments by PayPal in Ukraine. But an initiative group was created in the country to introduce this payment system in order to provide Ukrainians with an opportunity not only to make, but also to receive payments from other countries to their PayPal accounts. Thanks to this initiative group led by Ilya Königstein , the very resolution of the NBU was issued that allows individuals to use international payment systems. NBU representatives have already held several meetings with PayPal management on the issue of full implementation of the payment system in Ukraine. Back in August 2015, at the request of PayPal , the NBU representatives drafted a document officially confirming the NBU’s intention to allow Ukrainians to receive payments through the payment system, but the so-called Letter of Comfort was sent to PayPal managers only in December. But despite this, the important decree number 65, which was discussed above, was still made. On March 2, a meeting took place between representatives of the NBU and PayPal , at which it turned out that PayPal does not yet see the expediency of introducing a payment system in the country.
TOTAL
Taking into account the latest changes in the legislation of Ukraine, a freelancer in order to officially conduct his professional activities on legal grounds using international electronic payment systems requires:
- Register as FL-P and select the single tax group;
- Open a current account FL-P in the bank;
- Open an account of an individual in the bank;
- Regularly provide reports on accounts in terms established by the legislation;
- Pay single tax FL-P depending on the selected group (137.80 UAH., 275. 60 UAH. Or 5% of income);
- Pay ERUs depending on changes in the minimum wage in Ukraine (ERUs in 2016: from UAH 303.16 to UAH 341).
- Pay 18% of income tax on income on the account of an individual.
Advice to Ukrainian freelancers
If you cooperate mainly with foreign customers and use international payment systems, and not the Invoice, then it is better to choose the 3rd single tax group FL-P, because if there is no income on the FL-P account, then take 5% not what
Source: https://habr.com/ru/post/299392/
All Articles