How Simplified Tax System Entrepreneurs Should Account for Income from Wise, Payoneer, and PayPal: What Does the Legislation Say? Tips from Taxer
IT ClusterReceiving income through international payment systems is common practice for many sole proprietors (FOPs) on the simplified tax system who collaborate with foreign clients. However, properly reflecting such transactions in tax reporting raises many questions. How should funds from Wise, Payoneer, and PayPal be included in an entrepreneur’s income? Let’s break it down.
Wise: Key Rules
Sole proprietors on the simplified tax system must account for all income from business activities credited to their accounts in Ukrainian banks. This also applies to funds received via the Wise payment system.
Important points to consider:
- Funds from a Wise business account must be transferred to the FOP’s bank account in UAH at the NBU exchange rate on the date of receipt.
- The transfer must be completed by the end of the tax period.
- The payment system’s commission is included in the total income amount.
- If deadlines are missed, these funds will be considered personal income and subject to Personal Income Tax (PIT) at 18% and Military Tax at 5% (previously 1.5% until December 1, 2024, and 5% thereafter).
Payoneer: Accounting Specifics
The process for accounting income from Payoneer is similar to Wise. Entrepreneurs must include Payoneer funds in their income if they transfer them to their FOP bank account on time.
Key nuances:
- Funds from Payoneer must be transferred to the FOP’s bank account by the end of the tax period.
- If deadlines are missed, these funds will also be considered personal income and taxed at PIT (18%) and Military Tax (5%).
PayPal: Opportunities and Limitations
In early 2022, it was possible to link an FOP key card to PayPal and receive payments directly into an FOP account, but this option was short-lived. Currently, business accounts on PayPal are unavailable in Ukraine.
If an FOP key card is linked to PayPal and funds are deposited into an FOP account (opened in a Ukrainian bank), these funds can be included as business income and subject to the simplified tax system. However, if the FOP key card is not linked to PayPal, the funds are considered personal income. In this case, the entrepreneur must file a Personal Income and Asset Declaration as an individual by May 1 and pay taxes (PIT — 18%, Military Tax — 5%) by August 1.
⚠ The Ukrainian Tax Service has not yet provided clear guidelines on accounting for income received via PayPal.
Key Takeaways
When receiving funds through Wise or Payoneer, entrepreneurs must:
✅ Transfer the funds to their FOP bank account in Ukraine by the end of the reporting period.
✅ Convert the funds into UAH at the NBU exchange rate on the date of receipt.
✅ Include all payment system fees in the total declared income.
🚨 Funds from PayPal should be treated as personal income.
Failure to meet these conditions may result in taxation as personal income at higher rates.
⚠ To avoid issues, it’s essential to regularly monitor changes in tax legislation. Compliance with the rules helps prevent fines and ensures business stability.
👉 Join the community of industry leaders with Kharkiv IT Cluster. Get expert IT insights first! 🔥
