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Tax implications for taxpayers on profits and irrevocable financial aid.

According to clause 44 of subparagraph 4, section 20 of the GCC, 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 irrevocable financial assistance to persons who are not taxpayers (excluding individuals) and those taxpayers taxed at a zero rate.
This increase does not apply to the irretrievably listed financial assistance to organizations that are unprofitable, and as of the date of such transfer are included in the Register of organizations and institutions without profit, clause 140.5.9 of the GCC applies to them.

This paragraph indicates that the financial result of the reporting period is increased by the amount of funds that are donated during the reporting year, to those organizations that have no profit.

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. The exception is non-profit organizations that are an association of insurers and the participation of an insurer in this association is a condition for carrying out activities in accordance with applicable law.

Therefore, if the recipient of assistance is a payer of income taxes on a general basis or an individual, then the company that provides such assistance does not make adjustments for the difference.

These transactions must be reflected in accordance with the accounting rules. That is, when forming the financial result before taxation.

If the recipient of assistance is a legal entity, is a single tax payer, then the company that provides irrevocable financial assistance needs to increase the financial result before taxation 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 profit for the previous year. This norm is legislatively enshrined in clause 140.5.10 of the GCC.

But, according to the Law of Ukraine No. 540 of March 30, 2020, income tax payers who calculate tax differences when determining the object of taxation for the reporting periods of 2020 can take into account the full amount of costs for the free transfer of funds in order to prevent the spread of coronavirus disease to public associations. charitable organizations, health care institutions of state or municipal property. But a prerequisite is that these operations are carried out from April 2, 2020 until the end of quarantine. This means that the 4% cap on taxable profits of the previous year does not apply to these transactions.

Payers of income tax, keep records of the difference, must keep separate records of such transactions to determine the object of taxation for the corresponding reporting periods of 2020.

These operations, according to accounting data, were carried out in the first quarter of 2020 and which, as of April 1, 2020, are subject to cost restrictions (no more than 4% of taxable profit of the previous year).

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