WHAT ARE THE TAX CONSEQUENCES FOR INCOME TAXPAYERS WHICH PROVIDE NON-GRANTED FINANCIAL ASSISTANCE?

 According to paragraph 44 of subparagraph 4, section 20 of the TCU, income taxpayers (those who take into account the difference), the financial result of the reporting period is increased by the amount that was listed as non-refundable financial assistance to non-taxpayers (excluding individuals) ) and those taxpayers who are taxed at a zero rate.

 This increase does not apply to non-refundable financial assistance to organizations that are non-profit, and on the date of such transfer entered in the Register of organizations and institutions have no profit, they apply paragraph 140.5.9 TCU.

 This paragraph states that the financial result of the reporting period is increased by the amount of funds that are transferred free of charge during the reporting year to those non-profit organizations.

 These organizations must be entered in the Register on the date of such transfer in the amount of not more than 4% of taxable income for the previous year. Exceptions are non-profit organizations that are an association of insurers and the participation of the insurer in this association is a condition for carrying out activities in accordance with applicable law.

 Therefore, if the recipient of the assistance is a general income taxpayer or an individual, the enterprise that provides such assistance does not make adjustments for the difference.

 These transactions must be reflected in accordance with accounting rules. That is, in the formation of the financial result before tax.

 If the recipient of the assistance is a legal entity that is a single tax payer, the enterprise that provides non-refundable financial assistance must increase the pre-tax financial result by the amount of such assistance.

 Similarly, the financial result of the reporting period should be increased by the amount of funds transferred free of charge during the reporting year to non-profit organizations in the amount of not more than 4% of taxable income for the previous year. This norm is legally enshrined in paragraph 140.5.10 of the TCU.

 However, in accordance with the Law of Ukraine №540 of March 30, 2020, income taxpayers who calculate tax differences in determining the object of taxation for the reporting periods of 2020 may take into account the full cost of gratuitous transfer of funds to prevent the spread of coronavirus disease to the public. associations, charitable organizations, health care institutions of state or communal property. But the prerequisite is that these operations are carried out from April 2, 2020 until the end of quarantine. This means that the limit of 4% of taxable income of the previous year does not apply to these transactions.

 Income taxpayers who keep records of the difference must keep separate records of such transactions to determine the object of taxation for the relevant reporting periods of 2020.

 These transactions, according to accounting, were carried out in the first quarter of 2020 and which on April 1, 2020 are subject to expenditure restrictions (not more than 4% of taxable income of the previous year).