The “OLX Tax” and Sales via Instagram: What the New Law on Digital Platforms Entails

The Verkhovna Rada of Ukraine has passed a law on the implementation of international automatic exchange of information regarding income earned through digital platforms and its taxation. The media has already dubbed it the “OLX tax,” although the changes actually apply to a much broader range of digital services.

The law aims to implement the OECD’s international standards and the EU’s DAC7 Directive, which provide for the exchange of information on the income of digital platform users. This is one of Ukraine’s international obligations as part of its cooperation with international financial partners.

The main goal of the new measures is to bring income earned through marketplaces and online services out of the shadows, as well as to establish transparent taxation rules for individuals who regularly sell goods or provide services online.

The new rules may apply to users of marketplaces, platforms for ordering services, delivery services, transportation services, property rental services, and other digital platforms. At the same time, it is important to understand that the mere fact of selling personal items does not automatically create tax obligations as a business entity.

The law provides that digital platform operators may act as tax agents: they will calculate and pay taxes on users’ income, as well as report the relevant information to tax authorities. This is intended to simplify tax administration for individuals and minimize the risks associated with non-compliance.

The issue of Instagram shops deserves special attention. If sales are made on a regular basis and exhibit characteristics of economic activity, tax authorities may consider such activity to be entrepreneurial. At the same time, the final mechanism for applying the new rules will depend on how they are implemented in practice and on official clarifications from regulatory authorities.

For individuals who occasionally sell personal items, the law should not create an additional tax burden. However, individuals who conduct systematic commercial activities through digital platforms should assess the need to properly formalize their activities and review their tax planning approaches now.

In light of the new rules, we recommend that online business owners conduct a legal and tax audit of their operations. This will allow them to adapt to legislative changes in a timely manner, avoid penalties, and minimize tax risks.

The specialists at our law firm are ready to provide advice on the application of the new legislation, the selection of the optimal business structure, and the protection of business interests in dealings with regulatory authorities.