5% Tax and Automatic Payments: Government Proposes New Rules for Online Income

The Cabinet of Ministers of Ukraine has approved a package of draft laws introducing a new taxation model for income earned through digital platforms. The key goal is to bring online earnings out of the shadow economy by establishing clear and simplified rules.

5% Tax Rate and Platform-Based Collection

Under the proposal:

• personal income tax (PIT) will be reduced to 5% (instead of the current 18%);
• digital platforms will act as tax agents, automatically withholding and paying taxes on behalf of individuals.

This means users will not need to file separate tax declarations for such income, as the process will be largely automated.

Who Will Qualify

The new regime will apply to individuals who:

• work without employees;
• are not registered as sole proprietors (entrepreneurs);
• use a dedicated account for their activity;
• have annual income within the установленого threshold (approximately UAH 7.2 million as of 2026);
• do not sell excisable goods.

Exceptions and Simplifications

The draft laws also introduce several simplifications:

• occasional sales of personal items (up to €2,000 per year) will not be taxed;
• no separate bank account is required for such low-level activity;
• online bulletin boards that only advertise goods or services will not fall under the new regulation.

Purpose of the Reform

The government expects the reform to:

• reduce shadow economic activity;
• ensure fair competition;
• simplify tax administration;
• increase budget revenues during wartime.

The new rules are expected to take effect from January 1, 2027.