Income from digital platforms without business registration — what the new 2025 draft law of the Government of Ukraine proposes

In September 2025, the Government of Ukraine introduced a new legislative draft aimed at regulating the income of individuals earning profits through digital platforms. This initiative continues broader reforms in tax policy, as well as the regulation of labor and civil-legal relations within the digital economy, and meets Ukraine’s obligations under the EU Association Agreement. The draft law allows individuals to receive legal income from digital platforms without the mandatory registration as private entrepreneurs (FOPs).

This topic has gained particular relevance due to the rapid growth of the digital services market in Ukraine, including the expansion of freelancers, content creators, bloggers, and marketplace users such as Amazon, Etsy, Upwork, and Ukrainian platforms. At the same time, the absence of unified tax accounting rules created tension for both contractors and the state, which lost potential tax revenues.

Background
Until now, the most common way to legalize income from digital platforms in Ukraine was registering as a FOP, usually under the third group of the simplified tax system. This provided minimal tax burdens—5% of income plus a mandatory social contribution (SSC). However, for many individuals, registration proved too complicated due to the sporadic nature of their earnings, small income volumes, or lack of regular clients.

Meanwhile, tax authorities highlighted a large “grey zone,” with employment relationships often disguised as freelance or service contracts and income not declared at all. This not only shrank the tax base but also created issues with social protection for workers, who lacked official insurance histories.

For these reasons, the government decided to present a new tool—the regime for legalizing income from digital platforms without FOP registration. Its aim is to establish fair and simple rules for millions of citizens working occasionally in the digital environment.

Key Provisions of the Draft Law

• The tax agent is the digital platform. Platforms that pay remuneration to Ukrainian users will act as tax agents: withholding tax at source and automatically transmitting data to tax authorities.
• Simplified taxation for individuals. Unlike FOPs, individuals will not maintain accounting, submit annual reports, or handle bookkeeping. Tax obligations are fulfilled at the moment of payment through the platform.
• Income thresholds. The draft sets certain annual limits (e.g., close to UAH 1 million); exceeding these will require registration as a FOP or switching regimes.
• Tax rate. A fixed rate, likely between 10–15% including social contributions, is foreseen. While higher than the FOP third group’s 5%, it’s simpler for irregular earners.
• Social guarantees. Part of the taxes is directed to record insurance history, allowing performers to accrue pension rights without separate SSC payments.

Potential Benefits

• Legalization of mass income. Thousands of people who receive irregular income from sales, services, or content can work transparently without bureaucratic hurdles.
• Increased tax receipts. The government estimates the potential at billions of hryvnias annually, considering the scale of the gig economy.
• Personal convenience. Performers avoid administrative costs of FOP registration and accounting.
• EU law integration. Many EU countries already use similar mechanisms, with the platform as tax agent, ensuring rule compatibility and reducing evasion.

Risks and Challenges

• Increased tax burden. For active freelancers with higher incomes, rates may be heavier than the current 5% for FOPs, potentially incentivizing off-platform “grey” channels.
• Administrative burden for platforms. Platform owners will face extra duties for accounting, reporting, and remitting taxes, possibly reducing interest in working with Ukrainian users.
• Double taxation risks for international platforms. There may be issues coordinating rules to avoid double collection when payments go through foreign accounts.
• Income thresholds. If set too low, many users may still need to become FOPs, negating the law’s benefits.

Labor Market Impact
The draft law acknowledges the reality of a large segment of the population working for digital platforms without traditional labor contracts—bloggers, marketplace traders, remote services in design, programming, translation, and other intellectual labor.

On one hand, it legalizes this area, reduces shadow economy size, and expands the tax base. On the other hand, it may cause a shift between FOPs and the new “individuals on platforms,” stimulating competition and changing the employment structure.

Expert response
Lawyers, tax consultants, and business representatives have mixed views. Some support the reform as a modern step toward legalizing digital business; others warn that excessive burdens on platforms and individuals could shrink the market or push freelancers into the shadow economy. The key challenge will be practical implementation—technical solutions for automated withholding, integration of international platforms with Ukrainian tax authorities, and flexible rules for small, occasional incomes.

Adoption prospects
The chances of passing the draft law are high given that it fulfills EU trends and expectations. However, specifics such as rates, thresholds, and the reporting mechanism may be refined in parliament. For the state, it is crucial that the model encourages voluntary compliance, rather than driving business underground; for citizens, the taxes must be transparent, fair, and not outweigh the benefits of legalization.

Thus, the new government initiative for platform income without mandatory FOP registration is an attempt to balance the interests of the state and millions of digital economy users. Its success will depend on how convenient, flexible, and beneficial the new rules are for practitioners, since their willingness to operate legally will determine the real impact of the reform.

Author – Maksym Bahniuk, Head of Tax and Customs Law Practice at WINNER Law Firm.