Legislation allows increasing the share capital of the company at the expense of additional contributions by means, stocks or non-current assets.Funds can be made by the founders both in non-cash form and in cash: through the cash desk of the bank or the cash desk of the company. What are the important aspects of accounting and taxation in this case need to be remembered by the accountant?
Tax implications
It should be recalled that cash lodgements to the cash of the company should be issued by the cash receipt note. Let’s explain why. Contribution to the share capital refers to non-operating income, which is not directly related to the sale of products (works, services). Since corporate rights are neither a product nor a service, when making money as a contribution to the statutory capital, the cash register is not needed to be applied.
It should also be remembered about cash restrictions.
Income tax
The subject to taxation of the income tax is the financial result (profit or loss), determined by the accounting rules, taking into account the differences.
In accordance with para.5 of Accounting Standards 15 “Income”, the capital growth at the expenses of contributions from participants of the company should not be recognized as income. In addition, tax differences, related to the formation of the share capital, are not provided in the Tax Code of Ukraine (hereinafter - TCU). Therefore, the transaction for making a contribution to the share capital does not affect the size of the subject to taxation of the income tax.
Unified tax
If the company is in the simplified taxation system, such funds do not affect the subject to taxation of the unified tax. Consequently, the amount of funds made by the founders or participants in the authorized capital of the payer of the unified tax is not the income of such a payer (sub-para. 8 of para. 292.11 of TCU).
VAT
As for the value-added tax (hereinafter - VAT), taking into account the requirements of sub-para. 196.1.1 of TCU, the transaction for the issue (placement) of shares and corporate rights is not the subject to VAT. Therefore, the issuer does not incur tax liabilities. Receiving the contribution also does not result in a tax credit on VAT, since this transaction is not the supply of goods or services (paras.14.1.185, 14.1.191 of TCU). For the same reasons, the distribution of incoming VAT is not carried out, as required by paragraph 199.1 of TCU for purchases for transactions that are taxed and not subject to VAT.
Consequently, tax implications do not arise.
Accounting nuances
The means of correspondence accounts will be the same as in the formation of the share capital when the reflection of transactions on increasing of the share capital by additional contributions. The reflection of the funds received from the founder is as follows in accounting.
It is required to substantiate the replenishment of the share capital by the issued order on its replenishment. It is also necessary to amend the capital of the company on the share capital increase. The record is made in the accounting: Dr 46 “Unpaid capital” - Cr 401 “Share capital”.
Henceforth, money can be made in any way, including through a cash desk or bank account. This transaction is accompanied by the record: Dr 301 “Cash in national currency” or 311 “Current accounts in national currency” - Cr 46.
After that, the company can use the funds for other purposes in commercial transactions.
