Marketplace commission vs simplified tax regime

The commission that a marketplace withholds from a seller’s revenue is turning from a mere “technical detail” into a real tax risk for single‑tax entrepreneurs, as the tax authorities now look at the actual movement of money rather than the contract title. For sole proprietors selling via foreign platforms such as Etsy, the model where the marketplace first receives the full payment and then automatically deducts its fee from the seller’s balance may be treated as a non‑cash form of settlement and a violation of the simplified tax regime.

How the marketplace sales model works
Typically, a sole proprietor signs a commission agreement with a Ukrainian intermediary company: the goods are sold through the LLC’s account on the marketplace, the buyer pays the platform, it withholds its fees and only the remainder is transferred to the intermediary and then to the entrepreneur. Formally, the contract may state that the sole proprietor receives the “full amount of proceeds”, but in practice the funds arrive already net of the marketplace commission. This is exactly what worries the tax authorities: for a single‑tax payer, income is the full amount paid by the customer, so withholding a commission from revenue may be viewed as a non‑cash form of settlement, which is prohibited for simplified‑tax payers.

Tax authority arguments and court practice
The tax service relies on the Tax Code rules: for third‑group sole proprietors only cash receipts to the bank account or cash desk are allowed, with no set‑offs, barter or deduction of remuneration from revenue. Therefore, when the marketplace is the first to receive the money and the seller sees only the “net amount” after fees, the authorities consider that part of the income was received in a non‑cash form, namely as services of the platform paid on the seller’s behalf. Consultants refer to Supreme Court cases on classic commission contracts, where only the agent’s commission is recognised as its income, but the tax service stresses that for the single‑tax regime the decisive factor is the actual settlement mechanism, and automatic deduction of commissions from revenue under a marketplace offer does not comply with the simplified system.

Why the simplified regime is “at risk”
If the tax authorities conclude that a single‑tax sole proprietor has been receiving income in a prohibited form, they revoke the right to the simplified system from the beginning of the quarter in which the breach occurred, and then issue a package of assessments: tax under the general regime, 18% personal income tax plus 1.5% military levy, penalties, interest and a possible VAT review on transactions with non‑residents. For businesses that have for years reported only “net” income from marketplaces, such a retroactive shift to the general regime can make operations effectively unprofitable. In addition, if the sole proprietor is a VAT payer and receives electronic services from a foreign platform (commissions, advertising), they must self‑assess and pay VAT on the value of those services; if they do not, the tax authorities will assess VAT and penalties regardless of their single‑tax status.

Does this mean the end of marketplace sales for single‑tax payers
Despite the tough wording of the guidance, selling through marketplaces is not banned as such. The problem lies in the configuration of cash flows: when the marketplace or intermediary first receives the full amount, withholds its commissions and only then transfers the balance to the sole proprietor, the tax authorities can argue that part of the single‑tax payer’s income never reached their account in monetary form.

To mitigate the risks, lawyers recommend: reflecting in contracts and source documents the full amount paid by the customer and separately the cost of marketplace services, which the sole proprietor pays in money (even if this is effectively a set‑off); checking whether it might be more efficient to move to the general regime where marketplace commissions are high and margins are low; and, where turnover through foreign platforms is significant, structuring the business through a legal entity on the general regime and keeping the sole proprietor for separate domestic projects.

At the same time, general rules for single‑tax sole proprietors are tightening: full payment of social contributions has been restored, the military levy now applies to all groups, and oversight of “grey” cash flows and foreign‑trade operations is being strengthened. Against this backdrop, marketplace sales with automatic commission withholding are viewed not as isolated cases but as part of a broader problem of non‑transparent financial flows.

What sole proprietors and small businesses should do
Those already selling via foreign marketplaces should start with an audit of contracts and actual payment flows: who is party to the offer, to whose account customer payments actually arrive and what amount is reported as income. Next comes modelling tax scenarios: whether the business still fits within single‑tax limits when full revenue is counted, and how painful a switch to the general regime would be. If the commission‑withholding mechanism cannot be changed, one must choose between higher tax costs (general regime / company) and finding platforms with clearer settlement mechanics that do not conflict with the simplified system. Most importantly, do not rely solely on generic guidance: local tax offices may interpret similar cases differently, and the cost of an error today can be measured not in thousands but in millions of hryvnias.

If you have any questions or issues related to the taxation of marketplace sales, assessing the risk of losing single‑tax status or choosing the optimal structure (sole proprietor or company), seek professional advice to analyse your situation and minimise potential consequences.

Author – Yuliia Popadyn, attorney in tax and housing law at the law firm “Legal Company ‘WINNER’.