At the beginning of winter, users of Google services received a notification about a 20% increase in the cost of services. Digital Agency decided to delve into the details and find out what these changes are related to and who they concern. What interesting and new things we learned - read below.
Reasons for the increase in the cost of Google services
The increase in the cost of Google services in Ukraine is caused by the bill on taxes on online services adopted in June 2021. Law No. 1525–IX provides for the introduction of a 20% value-added tax (VAT) on electronic services provided to citizens of Ukraine by companies that are not residents of our country, that is, not territorially registered in it.
In particular, the changes concern the following services:
- cloud data storage;
- distance learning;
- software and its maintenance;
- games and subscriptions to application stores;
- access to TV channels;
- access to movie databases, e-books, magazines;
- online advertising, etc.
Foreign companies that provide such online services in Ukraine are now required to register as VAT payers. To do this, they will be provided with a simplified registration system. As a result, they will now pay 20% tax to the treasury of our state from each transaction.
On the Internet, such an initiative is called the Google tax or the Facebook tax, but the increase applies not only to these companies but also to other service providers that do not have a permanent representative office in Ukraine. These include, in particular, such giants as Meta (aka Facebook), Apple, Microsoft, Netflix, and many others.
What is known about the Google and Facebook tax law in Ukraine?
According to the draft law, the Google tax increase in Ukraine is planned from January 1, 2022. By sending user letters, Google only informs customers about the upcoming increase in cost - this is normal practice for large corporations, so there is no need to worry yet, the price of services for this month will remain unchanged.
However, the price increase for Google services will still happen very soon. In the near future, the following are expected to increase in price:
- YouTube Music;
- YouTube Premium;
- Google Drive;
- programs and games from the Google Play Market.
The increase in prices for Google services will definitely not bypass Google Ads users who are not officially registered as a legal entity and act as an individual. Now, if they pay for the service by bank transfer, VAT will also be charged by such advertisers. You can read more about this here.
Who is not affected by the tax changes
The bill considers introducing a value-added tax on online services provided to individuals or private entrepreneurs. As for legal entities, the cost of Google services is not expected to increase for them. This is due to the fact that, according to Ukrainian legislation and Google Cloud rules, they are obliged to pay taxes on their own.
If you work legally, are registered as a legal entity, and officially use a Google account for commercial purposes, the tax innovations do not apply to you and you do not need to take any action to confirm your status. Just do not forget to regularly pay taxes in full.
What will definitely not increase in price
The changes will not affect:
- goods that include electronic services if the services are included in their price;
- online orders, booking of goods that are delivered without using the Internet;
- online learning services if the student and teacher use the Internet as a means of communication.
