How cashback could affect social benefits

Cashback programs are becoming increasingly popular in Ukraine, and today almost all banks offer them. At the same time, it is important to remember that, in addition to the obvious benefits, such programs may also carry certain risks for cashback recipients.

What is cashback?

Literally, “cashback” means “return of cash.” In the modern context, it refers to the return of a certain percentage of money spent from a bank card when purchasing goods or services.

In Ukraine, the amount of cashback can range from 0.35% to 30% of the amount spent and depends on the terms of a particular program.

At the same time, it should be taken into account that saving significant amounts is usually not possible even with active spending. Banks set limits on the amount of cashback—either on its accrual or on the withdrawal of funds. Most often, the maximum amount that can be received per month is about 500 UAH.

Is cashback considered income?

Yes. Cashback is considered income, and therefore the following should be taken into account.

1. Cashback is taxed

According to the Tax Code of Ukraine, cashback is considered the income of an individual and is subject to taxation:

personal income tax — 18%

military levy — 5%

Thus, the total tax burden amounts to 23%. At the same time, you do not need to pay these taxes yourself. Banks act as tax agents: they automatically withhold the necessary amount when the cashback is transferred to your main account and independently remit it to the relevant budgets. In other words, the amount you receive on your card is already the “net” amount after taxation.

For example, if 500 UAH of cashback are accumulated in a month, the amount that can actually be received to a card account will be:

500 UAH – 23% = 385 UAH

2. Cashback may affect social benefits

Most social benefits in Ukraine are granted taking into account the average monthly total household income.

For example, assistance to low-income families is provided if the family income is lower than the subsistence minimum for the family. In such a situation, the received cashback may be counted as income and could potentially affect the eligibility for social assistance or its amount.

Is the “National Cashback” taxed?

No. Funds received within the framework of the state program “National Cashback” are not taxed and are not taken into account when granting subsidies and other social benefits.

At the same time, this program has a number of additional restrictions. In particular, such funds: