In any economic activity, there are costs that are not directly related to entrepreneurship. How to display them in reporting, in particular, what are the nuances of taxation with income tax – read further.
Determination of the object of income tax taxation
According to para. 1 of item 134.1.1 of the Tax Code of Ukraine (hereinafter - the Tax Code), the object of income tax taxation is income with a source of origin in Ukraine and outside its borders, which is determined by adjusting (increasing or decreasing) the financial result before taxation (profit or loss), determined in the financial statements of the enterprise in accordance with the national provisions (standards) of accounting or international standards of financial reporting, on the difference, which are determined by the relevant provisions of the Tax Code.
Paragraph 8 of tem 134.1.1 of the Tax Code establishes that for taxpayers whose annual income from any activity (excluding indirect taxes), determined according to accounting rules for the last annual reporting period, does not exceed UAH 40 million, the object of taxation may be established without adjustment of the financial result before taxation for all differences (except for the negative value of the object of taxation of the previous tax (reporting) years and adjustments specified in items 140.4.8 and 140.5.16 of the Tax Code), determined in accordance with the provisions of chapter III of the Tax Code.
A taxpayer whose annual income (excluding indirect taxes), determined according to accounting rules for the last annual reporting period, does not exceed UAH 40 million, may decide not to apply adjustments to the financial result before taxation for all differences (except for the negative value of the object of taxation of the previous tax (reporting) years and adjustments established by items 140.4.8 and 140.5.16 of the Tax Code), determined in accordance with the provisions of chapter III of the Tax Code, no more than once during a continuous set of years in which this income amout criterion is met.
The taxpayer indicates the decision made in the tax return for this tax submitted for the first year in such a continuous set of years. In subsequent years, adjustments to the financial result of such a combination are also not applied (except for the negative value of the object of taxation of the previous tax (reporting) years and the adjustments specified in items 140.4.8 and 140.5.16 of the Tax Code).
Recognition of expenses of the reporting period
According to Art. 4 of Law of Ukraine No. 996-XIV of July 16, 1999 "On Accounting and Financial Reporting in Ukraine", accounting and financial reporting are based, in particular, on the accrual principle, according to which income and expenses are reflected in accounting and financial reporting at the moment of their occurrence, regardless of the date of receipt or payment of funds.
The national regulation (standard) of accounting "Expenses", approved by the order of the Ministry of Finance No. 318 of December 31, 1999, defines the methodological principles of forming information about enterprise expenses in accounting and its disclosure in financial statements.
Expenses of the reporting period are recognized as either a decrease in assets or an increase in liabilities, which leads to a decrease in the company's equity capital (with the exception of a decrease in capital as a result of its withdrawal or distribution by owners), provided that these expenses can be reliably estimated (item 6 of NAS 16). Item 7 of NAS 16 establishes that expenses are recognized as expenses of a certain period simultaneously with the recognition of the income for which they were incurred. Expenses that cannot be directly related to the income of a certain period are reflected as part of the expenses of the reporting period in which they were incurred.
If the asset provides the receipt of economic benefits during several accounting periods, then the costs are recognized by systematically distributing its value (for example, in the form of depreciation) between the relevant accounting periods (item 8 of NAS 16). At the same time, item 9 of NAS 16 establishes that expenses, in particular, a decrease in assets or an increase in liabilities that do not correspond to the characteristics specified in item 6 of NAS 16, as well as costs that are reflected by a decrease in equity in accordance with the National Accounting Standards.
Thus, the formation of costs when determining the financial result before taxation for the reporting tax period is carried out in accordance with the National Accounting Standards or the International Financial Reporting Standards.
For tax purposes, differences in depreciation of non-current assets are taken into account. According to item 138.3.2 of the Tax Code are not subject to depreciation and are carried out at the expense of relevant sources, in particular, costs for the purchase/independent production of non-production fixed assets, non-production intangible assets and costs for repair, reconstruction, modernization or other improvements of non-production fixed assets, non-production intangible assets.
The terms "non-production fixed assets" and "non-production intangible assets" mean, respectively, fixed assets and intangible assets not intended for use in the taxpayer's economic activity. For the purposes of income tax, depreciation of fixed assets and intangible assets is calculated if they are intended for use in the taxpayer's economic activity.
