A Ukrainian sole proprietor (FOP) does not have to sell foreign-currency proceeds as soon as they arrive: the mandatory sale requirement has been abolished. For tax purposes, foreign-currency income is converted into hryvnias at the National Bank of Ukraine (NBU) official rate on the date the money is received. A later sale of the currency has different tax consequences under the simplified and general tax systems.
For a single-tax FOP, a positive difference arising when the bank sells the currency on the entrepreneur's instruction is not business income. For an FOP under the general tax system, the tax authority requires that positive difference to be included in annual taxable income; a negative difference is not deductible.
Must foreign-currency proceeds be sold?
Mandatory sale of a portion of foreign-currency receipts ended on 20 June 2019 under NBU Resolution No. 78. An FOP may keep the money in a current foreign-currency account or instruct the bank to sell it. Each transaction remains subject to current foreign-exchange rules and the bank's terms. Abolition of mandatory sale does not remove the rules governing the use of business-account funds.
Income under the single-tax system
Convert foreign-currency income into hryvnias at the NBU official rate on the date of receipt under Tax Code clauses 292.5–292.6. If the money first reaches a bank distribution account and is later credited to a third-group FOP's current foreign-currency account, the tax authority treats the latter date as the income date. For second- and third-group FOPs, a bank fee does not reduce the contractual income amount.
Selling currency already received does not create a second income entry equal to the full hryvnia payment from the bank: the proceeds were recognised when received. According to the tax authority, a positive difference from a bank sale on the instruction of a single-tax FOP is not included in income; this guidance excludes e-residents. A later change in the NBU rate alone does not require that income to be recalculated.
Income under the general tax system
Convert business proceeds into hryvnias at the NBU rate on the date received and record them in the income and expense register. If a subsequent currency sale creates a positive difference, the tax authority requires it to be included in annual taxable income and the annual personal income tax return.
A negative difference from that sale is not a deductible expense. Keep the contract, bank statements and currency-sale documents to substantiate the amounts and transaction dates.
Official sources
- NBU Board Resolution No. 78 of 18 June 2019 — abolition of mandatory sale.
- Tax Code of Ukraine No. 2755-VI — clauses 292.1, 292.5, 292.6, 177.2 and 177.4.
- Tax authority: positive difference for single-tax FOPs; foreign-currency income and bank fees; income date after a distribution account.
- Tax authority: positive difference under the general system; negative difference.
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