Law of Ukraine “On Amendments to Certain Legislative Acts Aimed at Providing Additional Social and Economic Guarantees in Connection with the Spread of Coronavirus Disease (COVID-2019)” No. 540 of March 30, 2020 (hereinafter – Law No. 540) which entered into force on April 2, 2020, made many changes in business activity. What should income taxpayers know?
In Information Letter No. 8 the tax authorities considered, in particular, the innovations introduced on April 2, 2020 by Law № 540 in terms of imposition of income tax.
We are talking about preferences for such people.
Legal entities - income taxpayers who transfer (delivery) funds (goods) to non-profit organizations during the quarantine
According to new item 511, subdivision 4, Chapter XX of the Tax Code of Ukraine (hereinafter – Tax Code), such income taxpayers have the right not to apply the tax difference provided for in subitem 140.5.9 of the Tax Code. This relief applies to voluntary transfer of:
- cash;
- medicines to provide medical care to patients;
- disinfectants, antiseptics;
- medical equipment;
- personal protective equipment;
- medical devices for screening patients;
- consumables for medical care;
- medical devices, laboratory equipment, consumables, reagents for laboratory tests;
- medical devices, laboratory equipment, consumables for infectious diseases departments, pathology departments, etc .;
- personal hygiene products;
- food;
- goods according to the list determined by the Cabinet of Ministers.
The specified relief is effective if the funds/goods from the following list are transferred to:
- public association;
- charitable organizations;
- Ministry of Health of Ukraine;
- other central executive bodies that implement state policy in the areas of sanitary and epidemiological well-being of the population, quality control and safety of medicines, combating HIV/AIDS and other socially dangerous diseases;
- person authorized to procure in the field of health care (State Enterprise “Medical Procurement of Ukraine”);
- health care facilities of state and/or communal property;
- structural subdivisions on health care of regional, Kyiv and Sevastopol city state administrations.
Therefore, income taxpayers when determining the object of taxation for fiscal (reporting) periods of 2020 will be able to take into account the full amount of costs for free transfer (funds/goods from the list) only for transactions to provide such assistance to the above entities and provided that these operations are carried out from April 2, 2020 until the end of quarantine. The limit of 4% of the previous year's taxable income should not be applied to these transactions.
In addition, income taxpayers whose transactions fall under the requirements of item 511, subdivision 4, Chapter XX of the Tax Code, should keep separate records of such transactions to determine the object of taxation for the relevant fiscal (reporting) periods of 2020.
Legal entities – payers of corporate income tax, which receive assistance from legal entities and/or individuals during the quarantine, in order to prevent the spread of coronavirus in Ukraine
It is relief defined in new item 512, subdivision 4, Chapter XX of the tax Code, which is provided for:
- health care facilities of state and/or communal property (if such facilities are payers of income tax);
- person authorized to procure in the field of health care.
For these entities in the case of determining the object of income tax for the fiscal (reporting) periods of 2020:
1) the financial result is reduced by the amount of income recognized under the accounting rules from the receipt of:
- cash;
- medicines to provide medical care to patients;
- disinfectants, antiseptics;
- medical equipment;
- personal protective equipment;
- medical devices for screening patients;
- consumables for medical care;
- medical devices, laboratory equipment, consumables, reagents for laboratory tests;
- medical devices, laboratory equipment, consumables for infectious diseases departments, pathology departments, etc .;
- personal hygiene products;
- food;
- goods according to the list determined by the Cabinet of Ministers;
2) the financial result is increased by the amount of expenses recognized under the accounting rules, due to the use by the above entities of these funds (equipment, goods, materials) in any fiscal (reporting) periods of 2020 and subsequent years (if relevant balances are available as of December 31, 2020, their further use in such subsequent periods).
In view of abovementioned, the payers of income tax, defined in item 512, subdivision 4, Chapter XX of the tax Code, who receive funds (equipment, goods, materials) listed in this item, must keep for tax purposes a separate record of their receipt in 2020 and use in 2020 and subsequent years.
