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Business In Social Networks: Legal Features And Taxation In Ukraine.

Tetyana Antoniuk, Oleksandra Buhrina,  EO-204i, KNEU

Introduction


All those who are striving for the successful development of their business today cannot ignore interaction with social networks. Their popularity is so great that there is hardly no better advertising platform for promoting goods or services.

Social networks for business can become an indispensable assistant if they are used correctly.

The purpose of our study is to show the reasons for the popularity of doing business on social networks, analyze the main advantages and disadvantages, tell what are the types of earnings online and how are they regulated (legal aspects).

The most important part is the taxation of business in social networks. That`s why we will analyze what are the problems, challenges and prospects in this field in Ukraine.

The advantages of working with networks include: The ability to assert itself to a huge audience of users. Advertising on social networks helps to attract attention to your brand every second.

Targeted advertising makes it possible to attract exactly the audience that interests your company. Ease of use allows you to establish feedback with your customers, which provides a continuous analysis of the needs, interests and requests of consumers.

Working with sites where users from all over the world gather is the cheapest type of advertising compared to all other possible ways of presenting your product. Features of the organization of user actions in a particular network provide the effect of word of mouth, which leads to the fact that over time, customers will find your product and brand themselves.

The main thing that needs to be done is to take into account the features of each site individually, since they all differ primarily in the audience that gathers in them.

Unlike a full-fledged online store site, social networks have very limited functionality in terms of sales, but are used by many people due to their freeness.

The essence of this approach is to create a public page or community, work on increasing the number of participants and offering goods to this audience.

It does not work in all niches, but still works. For example, the sale of clothing and accessories is going well, but to sell just as successfully auto parts through Facebook or Instagram is unlikely to succeed.

How to succeed in social networks?

Business promotion in social networks works according to its own specific rules.

First of all, it should be clearly understood that only “entrepreneurs” for whom these sites are the only way to sell their goods will be able to go far from “bare” enthusiasm.

They have the opportunity to constantly be on the network and engage exclusively in promoting products among its users. If your business uses this method as an auxiliary development tool, then do not neglect the following rules:

The budget for promoting a company among active users of social platforms cannot be limited to ten thousand rubles. Such an amount will not be able to provide endless orders and audience attention.

Do not even try to do everything yourself. Today, well-trained people exist to work in social networks.

Otherwise, all your efforts will turn into a normal waste of your capital. Focus your attention on one network, don’t spray right on everything, to be everywhere and at the same time with a good result will not work.

Communicate with your audience: answer questions, organize rallies and promotions, organize events, encourage them to act.

Business in social networks involves posting information that carries an interactive message that helps to enter into a dialogue and start a discussion.

Save the time of your users: post only those posts that are of some value, not informational spam. Do not forget that users should be given the opportunity to express their opinion about what they see in your group or on your page.

Examples of social networks for business.

In order to determine which network is suitable for your project, you need to understand the features of each of them.

Instagram:

This platform is considered one of the youngest, but has already managed to win the attention of a multimillion-dollar audience. A feature of the site is the placement of only photos.

In this regard, it should be remembered that:

here you must use the company name as the name;

actively use hashtags to help users filter the photos they want;

do not forget to inform your account about discounts, promotions, promo codes.

Moreover, if you already have pages on other networks, you do not need to arrange sales at once in all.

Let your subscribers on this platform feel their uniqueness; promoting your business on Instagram is inextricably linked to the attention you pay to your subscribers.

At least once a week, dedicate your post to one of them, and the number of people who want to monitor your posts will increase dramatically.

Facebook

Facebook is the largest social media network in existence (with over 2.07 billion monthly active Facebook users, 1.37 billion of them being daily users, 50% of which go on Facebook as soon as they wake up, it’s simply too important to set aside).

The platform shapes their opinions of the world and has a large influence on their consumer habits. With powerful audience targeting tools, Facebook is amazing in helping to find a “perfect” consumer.

There are three main audience selection options.You can either choose a core audience, selected manually and based on characteristics such as location or age; select a custom audience by uploading a contact list on Facebook, or find lookalike audiences – where you use information about your existing consumers to find people similar to them.

Facebook is the absolute king of native analytics. You can be sure that you can manage without any additional social media analytics tools when it comes to Facebook. Free or paid, as the platforms analytics tool, Facebook Insights, is nothing short of impressive.

You can get an overview of valuable data such as page likes (organic, paid, net likes and unlikes) post reach from organic or paid sources, and engagement in a weekly, monthly or quarterly view.

It breaks down data in all of these parameters and helps you identify your best-performing posts and ads with ease. 93% of social media advertisers use Facebook ads, and with good reason.

Because of its audience targeting capabilities, you can reach the most relevant people to display your content to in an array of available formats.  

In addition, you can optimize your ads for mobile and give your consumers an immersive, interactive experience. On Facebook, you can be certain that you’ll be spending your marketing dollars where it counts.

Due to the fact that the average click-through rate across all industries sits at 90%. Facebook is one of the best platforms for business. Not all of the reasons to use it were mentioned above.

Main challenges in doing business in social networks.

1. The effectiveness of the advertising campaign on social networks depends on the correct choice of social media platform.

2. To any active user of popular social networks it is obvious: at all similarity of functionality VKontakte differs from Facebook, Telegram – from WhatsApp, Youtube – from Vimeo, etc.

A good copywriter-marketer, knowing about the features of each popular network (or messenger), is able not only to write appropriate text for a particular channel, but also to adapt it to a specific target audience.

3. Each social network has its own audience, and hence its own interests and ways of perceiving information. If you post the same posts everywhere and do not optimize them for each social network, then there is a high probability that in some network they will read less.

4. Social networks – it’s not just creating a group, filling it with pictures and inviting colleagues there, it’s your face, like the site. This is an additional sales channel.

5. Content plan helps save time and, more importantly, relieves the headache of finding last minute materials or ideas for a post.

6. The greatest benefit of content management is to stretch the marketing budget so that you do not have to create all the content in an empty space.

7. Proper content management helps to create expert status to enhance the brand image, increase customer loyalty and increase relevance and visibility on the Internet.

Legal features in Ukraine.

In itself, the sale of goods using social networks is not illegal (unless it is weapons, drugs and other goods whose circulation is prohibited). There is no normative act in Ukrainian legislation that would prohibit the sale of goods through social networks.

From the point of view of our legislation, it will be the sale of goods to order outside the office or retail space. Such a sale must be executed accordingly.

The second point is that independent, regular sale through social networks for profit falls under the definition of entrepreneurial activity and should be carried out by a business entity natural or legal person registered in the law “On registration of legal entities and individuals – entrepreneurs “.

This is also violated by such sellers, because in the vast majority, they do not register their activities. The third point: they have to pay taxes, but they don’t. Interestingly, tax officials often visit social networks and know about this type of trade.

They know that these sellers have to register as businesses, have to pay a single social contribution, register as a taxpayer, choose the most appropriate tax system and pay a single social contribution and a single tax, but they do not care much.

Taxation.

Before starting a business, a taxation system should be chosen.

The simplified system of taxation of accounting and reporting is a mechanism of tax payment, which replaces the payment of a number of individual taxes with a single tax, as well as simplifies accounting and reporting to regulatory authorities.

Both legal person and legal entities can work on the simplified taxation system.

According to the Tax Code of Ukraine, single tax payers will be divided into 4 groups. The rate of the single tax paid by the entrepreneur depends on which group the taxable person belongs to.

The groups differ in the level of income, the number of employees, the nature of entrepreneurial activity.

The first group

Individuals – entrepreneurs who do not use the work of employees, carry out exclusively retail sale of goods from outlets in the markets and / or conduct business activities to provide household services to the population and whose income during the calendar year does not exceed 300,000 hryvnia;

Second group

Individuals – entrepreneurs engaged in economic activities for the provision of services, including household, single tax payers and / or the population, production and / or sale of goods, activities in the restaurant industry, provided that during the calendar year meet a set of such criteria:

do not use the work of employees or the number of persons who are in an employment relationship with them does not exceed 10 people at a time;

the amount of income does not exceed 1500000 hryvnias.

This sub-category does not apply to legal person who provide intermediary services for the purchase, sale, lease and valuation of real estate, as well as activities for the production, supply, sale of jewelry and household products made of precious metals, precious stones, precious stones of organogenic formation and semi-precious stones.

Such legal person belongs exclusively to the third group of single tax payers, if they meet the requirements established for such a group;

Third group

Legal person who do not use the work of employees or the number of persons who are in employment with them, is not limited and legal entities – business entities of any organizational and legal form, in which during the calendar year the amount of income does not exceed 5000000 hryvnias;

Fourth group

Agricultural producers:

a) legal entities, regardless of the organizational and legal form, in which the share of agricultural production for the previous tax (reporting) year is equal to or exceeds 75 percent;

b) natural persons – entrepreneurs who carry out activities exclusively within the framework of a farm registered in accordance with the Law of Ukraine “On Farming”

Single tax rates

Single tax rates are calculated as a percentage of income. The size of the single tax rate is affected by the status of the business entity as a VAT payer. The single tax rate for taxpayers belonging to the first group is up to 10% of the subsistence level for able-bodied persons.

The second group pays up to 20% of the minimum wage set by law on January 1 of the reporting year (UAH 4,723)

The third group will have to pay as a percentage of income: 3% (including VAT) and 5% (excluding VAT).

Income from which the single tax is withheld

I-III group of taxpayers (FD)

According to paragraphs. 1 item 292.1 TCU, income received during the tax (reporting) period in cash (cash and / or non-cash); tangible or intangible form.

The amount of income of the EP payer includes:

– the cost of goods received free of charge (works, services);

– the amount of accounts payable for which the statute of limitations has expired (for 3 groups of VAT payers);

– fees under power of attorney, commission, freight forwarding, agency agreements (excluding transit amounts)

According to paragraph 292.9 of the TCU, income received as a result of economic activity and taxed is not included in the total annual taxable income of a natural person, determined in accordance with Section IV of the TCU.

ІІІ group of taxpayers (LE)

According to paragraphs. 2 item 292.1 of the TCU,

any income, including income of representative offices, branches, offices, received during the tax (reporting) period in:

– in cash (cash and / or non-cash);

– tangible or intangible form.

The amount of income includes:

– the cost of goods received free of charge (works, services);

– the amount of accounts payable for which the statute of limitations has expired (for 3 groups of VAT payers);

– the value of goods (works, services) sold during the reporting period, for which prepayment (advance) was received during the period of payment of other taxes and fees specified by the TCU;

– remuneration under power of attorney, commission, freight forwarding, agency agreements (excluding transit amounts).

Conclusion

To sum up everything, the future of social media offers many exciting, new opportunities for businesses to interact with their customers. Going forward, it’s paramount for your business to integrate social media into your overall customer service experience.

Unfortunately, Ukraine still has an imperfect system of business taxation in social networks. But many small business owners are using sites like Facebook, Twitter, LinkedIn, Pinterest, and Instagram to help grow their businesses.

It`s legal and easy to use, so the social media is really great fundament for anyone who wants to start his own business in Ukraine.

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