Selling used items through a consignment shop — what are the tax implications?

The Main Department of the State Tax Service in the Dnipropetrovsk region has clarified the specifics of taxation on personal income tax (PIT) and military tax when selling used items through an intermediary.

According to paragraph 14.1.202 of paragraph 14.1 of Article 14 of Section I of the Tax Code of Ukraine, the sale (realization) of goods is defined as any operations conducted, in particular, under purchase and sale agreements and other civil law contracts that provide for the transfer of ownership rights to such goods for payment or compensation, regardless of the timing of payment.

The taxation of personal income is governed by Section IV of the Tax Code of Ukraine (TCU), specifically paragraph 163.1.1 of paragraph 163 of Article 163, which states that the taxable object for an individual resident is the total monthly (annual) taxable income.

The total monthly (annual) taxable income of the taxpayer includes other income, except for those specified in Article 165 of the TCU (subparagraph 164.2.20 of paragraph 164.2 of Article 164 of the TCU).

According to paragraph 167.1 of Article 167 of the TCU, the tax rate is set at 18% of the taxable base concerning income accrued (paid, provided) to the taxpayer (except in cases defined in subparagraphs 167.2 – 167.5 of Article 167 of the TCU).

Moreover, the income specified in Article 163 of the TCU is subject to military tax (subparagraph 1 of subparagraph 1.2 of paragraph 16 of Section 10 of Section XX of the TCU).

The military tax rate is 5% of the taxable object defined in subparagraph 1 of subparagraph 1.2 of paragraph 16 of Section 10 of Section XX of the TCU (subparagraph 1 of subparagraph 1.3 of paragraph 16 of Section 10 of Section XX of the TCU).

Persons who, according to the TCU, hold the status of tax agents, as well as single tax payers, are required to submit a tax calculation of the amounts of income accrued (paid) in favor of individual taxpayers, and the amounts of tax withheld, as well as the amounts of accrued single tax to the controlling authority at their primary place of accounting within the deadlines established by the TCU for the tax month (subparagraph “b” of paragraph 176.2 of Article 176 of the TCU).

By order of the Ministry of Finance of Ukraine dated January 13, 2015, No. 4, with amendments and additions, the form of the Tax Calculation of the amounts of income accrued (paid) in favor of individual taxpayers, and the amounts of tax withheld, as well as the amounts of accrued single tax, has been approved, along with the Procedure for filling out and submitting by tax agents the Tax Calculation of the amounts of income accrued (paid) in favor of individual taxpayers, and the amounts of tax withheld, as well as the amounts of accrued single tax.

According to paragraph 4 of Section IV of the Procedure in Appendix 4 “Information on the amounts of accrued income, withheld and paid tax on personal income and military tax” to the Calculation, in column 6 “Income Indicator”, the income indicator specified in Section 1 “Income Indicators for Individuals” of Appendix 2 to the Procedure is indicated.

The income indicators for individuals directory defines that other income is reflected in Appendix 4DF to the calculation by the income indicator “127”.

Considering the above, the income received by an individual resident from selling used items through a legal entity – an intermediary (individual entrepreneur – intermediary) is included by the intermediary in the total monthly (annual) taxable income of that individual as other income and is subject to personal income tax and military tax on general terms, with the corresponding reflection in Appendix 4DF to the Calculation by the income indicator "127".