Tax Changes for Gig Contractors: How to Adapt to New Requirements
IT ClusterIn 2025, significant changes to the tax legislation for gig contractors in Ukraine came into effect, which could have a major impact on the business processes and financial strategies of companies working with gig specialists. Specifically, the new clarifications from the State Tax Service (STS) regarding the taxation of work breaks for gig contractors have sparked considerable interest and require immediate attention from businesses that actively collaborate with this category of workers.
According to the information provided by Crowe Mikhailenko during their latest webinar, a letter from the STS dated January 3, 2025, clearly stated that compensation for a break in work for gig contractors cannot be considered payment for work performed and must be taxed at the standard 18% income tax rate. This decision overturns previous STS clarifications, under which compensation for work breaks could have been subject to a reduced 5% income tax rate.
What Does This Mean for Gig Contractors and Companies?
- Increased Tax Burden: All payments for work breaks are now subject to an 18% tax rate. This undoubtedly increases the tax burden on gig specialists and requires a review of financial models for companies working with this category of workers.
- Contract Modifications: Gig companies and Diya City residents, in particular, will need to adjust the terms of their contracts with gig contractors, especially regarding payment for breaks, to avoid negative tax consequences.
- Documenting Work Breaks: To optimize tax consequences, it is important to properly document breaks in work for gig specialists. This will help avoid misunderstandings with tax authorities and confirm the legitimacy of classifying breaks as compensated periods.
Recommendations from Crowe Mikhailenko Experts
During the webinar, Crowe Mikhailenko experts shared several practical tips on how to adapt to the new requirements:
- Explain to Gig Contractors: Given the higher income tax rate, it is important to explain to gig contractors in advance that the additional tax burden will be covered by their compensation. This will help prevent misunderstandings and establish fair cooperation terms.
- Short-Term Contracts: To minimize tax risks, companies may opt to sign short-term contracts with gig contractors, which allows for fewer breaks and better financial flow optimization.
- Work Flexibility: One important aspect is transitioning to flexible work conditions where breaks are documented, and tasks are completed without reference to specific dates. This allows for more effective management of work processes and reduces the risk of tax penalties.
Conclusion
These changes serve as an important signal for all companies working with gig contracts. The increased income tax rate and the changes in the taxation of work breaks necessitate a revision of existing business processes and tax strategies. At the same time, well-chosen contract management strategies and proper documentation can help minimize tax expenses and avoid legal issues.
Details of these changes and practical recommendations can be found in the Crowe Mikhailenko webinar recording:
