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New year with new taxes. What Google services will you have to pay more for?

Author : Iryna Shostak

Source : 112 Ukraine

From January 1, Ukrainians will receive a small "surprise" from Google - the Internet giant will raise prices for its paid services in Ukraine
23:11, 5 January 2022

Open source

If you want to use Google services without ads – you should pay 20% more. From January 1, Ukrainians will receive a small "surprise" from Google - the Internet giant will raise prices for its paid services in Ukraine. But you shouldn't be angry with the corporation. The Ukrainians received such a "gift" just under the New Year tree thanks to the tax law of Servants of the people party.

112ua.tv will tell you which online services are subject to the new tax and how much theiy will rise in price.

From January 1, every Ukrainian who wants to buy a package for watching movies, say, on Netflix, several games in the Play Market online application store, or subscribe to Youtube Premium, must add another 20% to the service price.

First, let's figure out where it all started. Law No. 1525-IX, adopted in July 2021, popularly referred to as the "Google tax law", introduces a special procedure for imposing VAT on non-resident companies that provide electronic services to persons residing in Ukraine. The largest companies Google and Meta (ex-Facebook) fall under it first. The law will also affect users of services from Apple, Amazon, Microsoft, Netflix, Spotify, Steam, Coursera, etc.

The tax applies to:

  •     downloading movies and books (watching and reading online),
  •     games and applications from app stores (including Google Play Store and App Store),
  •     subscription to electronic newspapers and magazines,
  •     subscription to streaming,
  •     access to databases, including the use of search engines,
  •     cloud storage services,
  •     distance education on the Internet, where participants complete tasks online, and grades are given automatically or with minimal participation of a teacher,
  •     software and its remote maintenance,
  •     provision of advertising services on the Internet.

It does not include:

  •     passenger transport services,
  •     catering services for the delivery of products,
  •     car rental services,
  •     online learning, if the Internet is used exclusively as a way of communication between a student and a teacher,
  •     consultation by e-mail,
  •     goods that include electronic services, if they are included in its cost.

According to the document, the author of which is the MP from Servant of the people Danylo Hetmantsev, foreign companies supplying electronic services to Ukrainians are required to register in Ukraine as payers of value added tax under a simplified system and pay it in the amount of 20% of the transaction amount. Anyone with annual turnover of transactions exceeds UAH 1 million is required to pay the tax. According to the initiators of the law, it will help to obtain additional resources for filling the state treasury.

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"World digital giants Google, Netflix, Booking.com, Bloomberg, Apple, Coursera and others from January 1, 2022 will have to register as a VAT payer for electronic services, report and pay VAT for the provision of electronic services in Ukraine," Hetmantsev said in an interview.

But ordinary Ukrainians will feel the consequences. It is they, as end users, who will pay the difference. After all, Google and other companies will simply raise the prices of their services.

Who will be affected by the change?

The first to talk about the rise in prices for services were in Google and Meta. So far, nothing has been heard from other tech giants, but they are unlikely to do otherwise and take the payment upon themselves.

So, not all Ukrainians will pay 20% more for Google services. Tariff changes will affect only individuals (ordinary Ukrainians) and private entrepreneurs who paid for advertising services with bank cards and are not registered as VAT payers in Ukraine.

If you are a representative of a registered business and use the paid services of a company, then we have good news for you - the innovation will not apply to clients with legal entity status. They have paid Google Cloud tax before. This is explained in emails from Google, which the company began sending out to users of its paid services in advance starting December 1.

"If you have a Google business account in Ukraine, this means that you are using it for commercial purposes on behalf of a legal registered legal entity. If you use Google Cloud services on behalf of a registered legal entity, then no additional action is required from you. ", the company said in a statement.

Also, Google was advised to go through the identification of tax status in Google Ads (individual, state of emergency or legal entity). But you can only add or update it once.

Facebook ads will also rise in price. The tax will affect those advertisers whose country of business or personal address is set as "Ukraine", who has not confirmed the status of "legal entity" or "individual entrepreneur" and who themselves added the VAT number to their Facebook advertising account. From January 1, the tax will be included in the cost of advertising sets automatically. In other words, the user will see the rise in price already in the check.

"In accordance with the new VAT rule in Ukraine, from January 1, 2022, Facebook is obliged by law to charge VAT on all advertising sales to all advertisers in Ukraine," the company said.

Now, on the pages of various popular services among Ukrainians, changes in the cost of services are not observed - the tariffs are the same. Perhaps these 20% will be charged from users already at the payment stage.

Why, in the end, will ordinary citizens pay in one way or another?

Until recently, when paying for foreign advertising, say on Facebook, legal entities and individual entrepreneurs used a small financial loophole - they paid with cards of individuals (ordinary Ukrainians). If they paid for the services properly, they would have to pay 40% more: 20% VAT + 20% tax on reparations. The innovation deprives them of this opportunity, because, as noted above, these 20% will already be automatically included in the services that ordinary Ukrainians will use.

In simple terms: before, large companies paid, for example, 10 UAH for a service, but they had to pay 12 UAH (together with VAT). According to the innovation, they will pay the same 12 UAH that they should have paid without additional VAT (it is included in the cost of the service itself). The Ukrainians simply received plus 20% tax.

Moreover, by introducing taxation for large overseas companies, the "Google Tax Act" canceled the taxation of "foreign advertising" for legal entities. In other words, Ukrainian companies and ordinary sole proprietors no longer have to pay 20% when purchasing an electronic service. Again, this cannot be said about ordinary citizens. This 20% will be withdrawn from them again automatically, so, as they say, everything will be painless.

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