Taxation of foreign currency income for individual entrepreneurs (FOP) in Ukraine on Wise and Payoneer: 6% or 23%?

The author of the article: Philipp Orlov

Modified date: 23 December 2025

If you are a sole proprietor (FOP) working with foreign clients – a designer, marketer, developer, or copywriter – sooner or later you face the question: how should you receive payments from abroad?

FOPs who receive payments from foreign clients via Wise or Payoneer often believe that it is enough to pay 5% single tax. However, in practice, a single mistake in the accounting model can lead the tax authorities to reclassify the income as personal (individual) income. In that case, instead of 6% in taxes, the entrepreneur risks paying 23% plus penalties.

This article will cover all the nuances of taxation for foreign currency receipts via Wise and Payoneer: what the official tax authorities say, the potential risks, and how to operate legally without incurring fines. Special attention will be given to the responsibility for not repatriating foreign revenue to Ukraine and receiving payments through Wise and Payoneer.

Wise and Payoneer: What These Payment Services Are and Why They Are Under Tax Scrutiny

Before diving into taxation, let’s understand what Wise and Payoneer are and why these payment systems are so popular among Ukrainian sole proprietors (FOPs) working with foreign clients.

What is Wise?

Wise is a British fintech company that provides international money transfer services. Its main advantage is low fees and real interbank currency exchange rates without additional markups.

What is Payoneer?

Payoneer is an American payment system specializing in B2B payments and working with international marketplaces (Amazon, Upwork, Fiverr, etc.).

Important: These are not regular bank accounts but payment systems providing electronic money services. According to the Tax Code of Ukraine, third-group single tax payers are not allowed to engage in activities related to issuing or circulating electronic money, or performing operations with payment cards or other payment devices, which are conducted according to international payment system rules.

How FOP Payments via Wise and Payoneer Are Taxed

Currently, Ukrainian tax legislation does not have a unified position on whether sole proprietors (FOPs) registered in Ukraine can receive funds through these payment systems and use them for personal purposes without mandatory repatriation of the currency to Ukraine. Taxes are paid under the standard taxation system for third-group FOPs.

Main aspects:

• Income is considered the amount converted into hryvnia on the date the funds are received, according to the official NBU exchange rate.
• Tax authorities consider that receiving funds on these payment systems constitutes electronic money, which is prohibited for single tax payers.

The main tax risk with Wise and Payoneer is that the tax service may classify funds in these accounts as electronic money rather than as a FOP bank account. For single tax payers, using electronic money in entrepreneurial activity is prohibited. This position is explicitly confirmed by the tax authority in the official clarification.

Key Steps and Recommendations for Entrepreneurs When Receiving Payments

1. Choosing a Payment System

The most popular payment systems for receiving international payments include:

• PayPal: Convenient for small businesses and freelancers, allows quick receipt of funds from abroad. Note: In Ukraine, PayPal has limitations – withdrawing funds to bank accounts is not available.
• Payoneer: Suitable for entrepreneurs working on international marketplaces and receiving payments in multiple currencies.
• Wise (formerly TransferWise): Offers low fees and favorable currency conversion rates. One of the most popular systems among Ukrainian FOPs.
• Stripe: Used by many online stores and services for payment processing.

When choosing a payment system, consider the following factors:

• Transaction fees
• Speed of fund receipt
• Ability to withdraw funds to a bank account in Ukraine
• Support for different currencies
• Security and transaction protection
• Ability to open a business account (critically important!)

2. Account Registration and Setup

Opening an Account

After choosing a payment system, you need to open a business account, not a personal one. To do this, follow these steps:

1. Go to the official website of the payment system.
2. Select account type: Business / Company
3. Fill out the registration form with your FOP details (name, EDRPOU/ITN, contact information)
4. Upload documents confirming FOP status (extract from EDR, FOP certificate)
5. Confirm registration via email.

Account Setup

After registration, configure your account to receive payments:

1. Specify a bank account for withdrawing funds (mandatory: FOP foreign currency account in a Ukrainian bank).
2. Select the currency in which payments will be received.
3. Set up notifications for transactions and payment confirmations.
4. Ensure two-factor authentication is enabled for security.

3. Issuing Invoices

An invoice is a document confirming the provision of services or sale of goods and contains the payment details. Key elements of an invoice:

• Issue date
• Invoice number
• Seller and buyer details (company name, contact information)
• Description of goods or services (detailed, according to your registered KVED codes)
• Quantity and price
• Total amount due
• Payment details (your Wise/Payoneer account information)

An invoice can be sent to the client via email or through specialized invoicing platforms (e.g., FreshBooks, QuickBooks). Ensure the client has received and confirmed the invoice.

Tip: Keep copies of all invoices – they are required for tax reporting and potential audits.

4. Receiving Payments

After sending the invoice, monitor the incoming payment. Most payment systems automatically notify when funds are received. Payment confirmation may include:

• Email notifications
• Notifications in the payment system dashboard
• SMS notifications (if enabled)

After receiving the payment in Wise/Payoneer, transfer the funds as soon as possible to your FOP foreign currency account in a Ukrainian bank. Log into your account in the payment system and submit a withdrawal request. The process can take from a few hours to several days depending on the payment system and bank.

Do not use funds directly from Wise/Payoneer (via card or ATM) – tax authorities may consider this as using electronic money, which is prohibited for single tax payers.

5. Accounting and Reporting

Each received payment should be recorded in accounting. This helps to:

• Monitor the financial status of your business
• Prepare for tax audits
• Analyze income and expenses
• Track proximity to the simplified tax system income limit

Received income must be declared and the corresponding taxes paid. To comply:

• Determine the taxable income amount
• Fill out tax declarations according to legislation
• Pay taxes within the established deadlines

Rules for Receiving Funds

If you receive funds via Wise or Payoneer, it is important to follow certain rules to minimize tax risks:

1. Use a business account, not a personal account.
2. Funds must be transferred to a FOP foreign currency account in a Ukrainian bank.
3. The payment chain should look like this: the client pays for services to Wise or Payoneer → funds are transferred to your FOP foreign currency account → income is recognized on the date of currency receipt according to the official NBU exchange rate.
4. Keep all documents: contracts with clients, invoices, confirmations of transfers from Wise/Payoneer to your FOP account.
5. Monitor official clarifications from tax authorities – legislation may change. Example of the official position of the State Tax Service.

It is important to choose the most advantageous option that allows you to avoid tax penalties and protect your business. In case of doubt, consult an experienced accountant or tax advisor.

Documentation and Income Verification Requirements

To avoid fines and administrative sanctions, it is important to have the following documents:

• Contracts with clients (in English or Ukrainian) clearly describing services, costs, and deadlines.
• Invoices for each payment with issue date, number, description of services, and amount.
• Excel table to record incoming funds: date received on Wise/Payoneer, date transferred to FOP foreign currency account, NBU exchange rate on the date received, and converted amount in UAH.
• Confirmation of transfers from Wise/Payoneer to your FOP foreign currency account (statements, transaction screenshots).

These documents will be needed for both quarterly reporting and possible tax audits.

Individual Tax Consultations (ITC): Do They Protect FOPs?

ITCs provided by various tax authorities do not offer a unified solution regarding taxation of foreign currency receipts. Moreover, they often contradict each other, creating additional confusion for entrepreneurs. Key points:

1. All foreign currency proceeds must enter Ukraine within 120 calendar days from the contract date (according to currency legislation).
2. Funds must be received in the FOP foreign currency account by the end of the tax year.

The problem is that different regional tax authorities may give different answers to the same question. Therefore, it is recommended to always rely on official clarifications from the central office of the State Tax Service and keep all documents confirming compliance. This means the final risk lies with the entrepreneur. That is why working with such payment services without a proper accounting model is not optimization, but a tax risk.

Possible Penalties and Tax Consequences

If the tax authorities can prove that this is personal income, the following penalties may apply:

• 18% personal income tax (PIT) and 5% military levy on the total income.
• Administrative fine from UAH 51 to UAH 136 for violating tax legislation.
• Cancellation of single tax registration, with all income taxed as personal income (18% + 5% = 23% instead of 6%).
• Penalty for underpayment – 25% of the unpaid tax amount.
• Interest for each day of late tax payment.

Example:

UAH 85,000


underpayment

UAH 21,250


25% penalty

That is why it is very important to comply with all the rules and keep all documents confirming that the funds were received specifically as an individual entrepreneur (FOP).

Conclusion

To avoid issues with the tax authorities when working through Wise and Payoneer:

1. Check the compliance of your registered KVED codes – the types of services in contracts and invoices must match your officially registered business activity codes.
2. Specify exact types of services in contracts and invoices – not just “consulting” or “services”, but a detailed description such as: “landing page design development”, “setting up Google Ads campaigns”, “blog article copywriting”, etc.
3. Comply with all tax requirements: use business accounts, transfer funds to the FOP foreign currency account, keep all documents, and submit declarations on time.
4. Follow official clarifications from the tax authorities – legislation changes constantly, and new requirements may appear.

It is important to choose the most beneficial option that will help avoid tax penalties and protect your business. Wise and Payoneer can be convenient tools, but only with the correct accounting model. At buh.ua, we do not just consult – we take responsibility for tax logic, accounting, and protecting entrepreneurs during audits.