“Should Ukrainians who earn on international online platforms prepare to pay taxes?”, — write: www.epravda.com.ua
In professional circles and not only, the “draining” of data from OnlyFans has been discussed for several weeks. And we are not talking about the content of a spicy nature, but about the income of the creators of this (perhaps, and not only this) content from Ukraine.
As a result, many questions have arisen, including those related to taxes and the consequences for the content creators themselves. I propose to discuss the most important of them here. And it is better to start with the taxes themselves.
What about taxes?The simplified picture looks like this. If you create content (not as an FOP) and directly receive a reward for it, then in Ukraine you will need to pay 18% personal income tax (PIT) plus 1.5% military duty (the rate may soon increase to 5%). At the same time, it does not matter whether you received money from abroad and whether you transferred it to Ukraine to your personal accounts.
In some cases, it can be argued that taxes should be lower or not arise at all. For example, such a situation may occur when the statute of limitations has expired, when content creators transferred the received funds to the accounts of their FOP or foreign companies, as well as when they, in principle, ceased to be considered tax residents (for example, in connection with moving abroad permanently place of residence). However, everything depends on individual circumstances and documents available at hand.
OnlyFans already pays taxes in Ukraine: do content creators need to pay additional taxes in this case?Indeed, OnlyFans has been paying 20% VAT on e-services (the same “Google tax”) in Ukraine for more than a year. In fact, it is paid by the subscribers of this platform when they transfer funds to it. However, VAT and taxes levied on the income of content creators are independent of each other.
Accordingly, in Ukraine, everyone pays their taxes: OnlyFans – VAT, content creators – personal income tax and military tax (if they work through the FOP – a single tax).
How did the tax office find out about the income of content creators?There is an agreement on avoidance of double taxation between Ukraine and Great Britain. In addition, both countries are parties to the Convention on Mutual Administrative Assistance in Tax Matters.
Both documents give the Ukrainian tax authorities the right to ask their British colleagues for the necessary information for tax purposes. Most likely, the tax official used her right.
CRS – a mechanism for automatic exchange of information on financial accounts with other countries – has also recently become fully operational for Ukraine. However, it is unlikely that the tax office received income data through CRS.
Why now?The main reason seems obvious: to replenish the budget in difficult times for the country. However, it is surprising that the tax office decided to receive income data only now and for such a limited period: if public sources are to be believed, then we are talking about the years 2020-2022. The above tools were in her arsenal before.
I also do not rule out that the tax office wants to approach this case prepared to make a demonstrative case out of this story and convey a clear message to all those who monetize their content on OnlyFans and similar foreign platforms: do not forget to pay taxes.
What will the tax office do with the received information?Most likely, the tax office will first send a request to clarify data on received income. If we believe the documents published on the network, then some have already received such requests and even agreed to voluntarily pay taxes.
If there is no answer within 15 days or if the tax authority is not satisfied with the answer, then a tax audit will be conducted. As part of this check, declared (official) incomes available in its databases can be compared with “newly discovered” amounts.
After the inspection, the tax office will prepare an act and a PPR with pre-calculated taxes and fines. However, the results of the inspection can be appealed through the tax office itself or the court.
If you do not take active measures, after the tax debt arises, the tax office will be able to transfer the taxpayer’s property to a tax lien, and after some time – sell it to repay the debt to the budget.
Of course, this is only a basic scenario, which does not exclude nuances in each specific case.
What about fines?If you do not take into account criminal liability, then the largest fine can be for late payment of taxes, which varies from 10% to 50% of the amount of unpaid taxes. A penalty may also be charged for each missed payment day. Of course, there are other fines for individual “tricks”, but smaller ones. For example, a fine of UAH 7,100 is provided for failure to respond to the request from the tax office, which was mentioned above.
However, there are currently some relaxations that were introduced during the period of martial law that content creators can still take advantage of. If they want to declare the income from OnlyFans now and pay all taxes, then the tax office will no longer be able to add fines and penalties for late payment.
What about criminal liability?It is necessary to distinguish between criminal liability for tax evasion and distribution of adult content. Depending on the circumstances, liability in both cases can be in the form of fines or even imprisonment.
In the first case, criminal liability may arise for failure to pay taxes in “large” amounts. What’s more, for each reporting year there is a threshold of unpaid taxes, upon reaching which the same criminal liability arises.
For example, in 2020 it was about UAH 3.1 million, in 2021 – UAH 3.4 million, and in 2022 – UAH 3.7 million in unpaid taxes. That is, in practice we are talking about quite significant amounts of income received and undeclared during one year (more than UAH 15 million).
When it comes to liability for the distribution of adult content, probably the main question is whether to pass on tax information to law enforcement. Of course, in theory this is possible, but in practice there are nuances.
First, if the tax office received income data through one of the two international treaties listed above, then such information is confidential. The tax office can share it and disclose it in very limited cases. In order to hand it over to the police, you need permission from the UK.
Secondly, in the tax reporting, the content creators do not show what exactly they received their income for, as well as the name of the counterparty (for example, the English company that OnlyFans uses). The tax office itself, as a rule, also rarely goes into these details, if taxes are paid at the maximum possible tax rate (and this is our case).
In addition, while OnlyFans is not associated with food or entertainment vlogs, receiving income from this platform does not automatically turn a content creator into a distributor of content that is still illegal in our country.
What should you think about?Of course, these are not all questions that may arise in practice. However, in the end, I suggest paying attention to something else.
For at least the last 15 years, the world has been moving in leaps and bounds towards tax transparency, automatic exchange of tax and financial information, as well as the introduction of new tax payment control tools. Ukraine is no exception in this respect.
For example, the rules of disclosure of information regarding foreign structures (KIK) and CRS are our new reality, in which the Ukrainian tax office is already “testing” its capabilities. The implementation of the DAC-7 directive with the exchange of information regarding sellers conducting their business through digital platforms is also just around the corner.
The rules of the game are becoming more and more complicated, and in the foreseeable future we will definitely see new cases in which the tax office will show its capabilities in obtaining information about taxpayers from abroad.
In such a world, competent personal tax planning becomes a necessary component of an entrepreneur of any level.