Current trends and legislative aspects of e-commerce in Ukraine

The wide-spread use of the Internet, the development of digital technologies and online payment systems, as well as the increased e-documents turnover all facilitate the rapid growth of the e-commerce market in Ukraine. Entities introduce e-solutions into their businesses in order to attract new clients by means of implementing the possibility for customers to pay online or to transfer money from their account anywhere in the world. Banks and payment systems functioning in Ukraine are also implementing new products, such as new expense management solutions, which permit money transfers without the issuance of payment cards.

The e-commerce market in Ukraine can be conditionally divided into the following main types: (a) electronic trade, including Internet – commerce; (b) mobile commerce, which allows consumers to make insignificant payments for goods and services to retailers via mobile payment instruments, i.e. instruments based on payment card chips integrated in SIM cards of mobile phones, interfaces for managing virtual purses for transfer of funds and payment for goods via Internet, etc.; (c) e-money issued based on National Bank of Ukraine (NBU) regulations (upon the registration of respective system of e-money by the NBU) and other so-called “electronic payment systems” for making online payments and money transfers which operate beyond the legislative framework of Ukraine.

E-commerce can be defined as a commercial activity in the sphere of advertisement and distribution of goods and services via information-telecommunication systems. Thus, the main difference of e-commerce from any other type of commerce is the form of its execution. The main legislative act governing e-commerce in Ukraine is the Law “On Electronic Commerce”, dated 3 September 2015, No. 675-VIII (the “Law”), which was being discussed by the Parliament and market players for almost three years prior to its adoption. The Law was developed based on and with the consideration of EU legislation, in particular EU Directive 2000/31/EU setting up an Internal Market framework for electronic commerce, which provides legal certainty for business and consumers alike. The adoption of the Law, which, in particular, equals electronic agreement executed by means of the exchange of electronic messages and signed by electronic signature or another analogue of own signature to the agreement executed in a written form which may serve as an evidence in the court, without any doubt is a progressive step towards the regulation of e-commerce market, approximation of the Ukrainian legislation to the legislation of EU, and opening new possibilities for both consumers or businesses.

However, the actual application of the Law to the e-commerce market has certain obstacles as a significant part of this market still remains unregulated and operates beyond the legislative framework (while generating multimillion profits). Also, other legislation of Ukraine requires adjustment to the Law in order to facilitate effective implementation of the latter. This relates, first of all, to the improvement of the mechanisms of accounting of e-commerce transactions and their taxation.

At the same time, there are issues in the sphere of e-commerce which require their solving and regulation, due to the fact that the speed of change of transaction execution technologies significantly outpaces the speed of legislation adjustment to such changes. In particular, as already mentioned above, there is a number of so-called “electronic payment systems” operating in Ukraine which offer customers the possibility of money transfer or making payments to other customers or service providers by means of creation of “electronic purse” on the Internet and making settlements with the use of so-called “units of value” which are neither money in the meaning of Ukrainian law nor electronic money regulated by the NBU, but rather constitute so-called monetary obligations of the payer towards the relevant vendor or money recipient, however in fact a money transfer and money remittance is taking place via such systems. These e-payment systems exist and operate without any registration and regulation by any state regulator, although Ukraine’s Law “On Payment Systems and Money Remittance in Ukraine”, dated 5 April 2001, No. 2346-III, as amended, specifies that the transfer of money in Ukraine can be carried out via international and Ukrainian payment systems, acting pursuant to its rules in compliance with Ukrainian law (including anti-money laundering legislation) and duly registered by the NBU. Accordingly, in case of unregulated online payment systems, the biggest concern is the risk of money laundering and the possibility of trade of prohibited goods and services via such systems. Additionally, the customer – who may for some reason lose money as a result of conducting operations via such systems – will face significant difficulties in their recovery and proving the transaction execution. Furthermore, law enforcement and tax authorities are activating their efforts for the prevention of the above mentioned unlawful activities. Respective legislative framework should be developed in order to regulate these issues and protect consumers` rights.

Given the above mentioned legislative uncertainties on one hand, and the untapped possibilities and potential profit of an e-commerce business in Ukraine on the other hand, it is understandable that individuals or legal entities wishing to establish such business should perform a thorough analysis and preparation thereto, in order to comply with all relevant legislative and regulatory requirements and mitigate any possible risks which may arise in this regard.

We as Eurofast may assist our clients in development and realization of new business models in the sphere of e-commerce in Ukraine and stand ready to provide all necessary assistance with respect to their implementation, including necessary accounting and tax consulting services.

Your contact for further queries is:

Anna Pushkaryova
Tax & Legal Associate
Tel: +38 067 504 67 39