The company owns a shopping center and wants to transfer it to another entity. How to properly register a property management agreement with the tax authority?
Taxation features
Property management agreements without the creation of legal entities, which are subject to the features of tax accounting and taxation of activities under such agreements, defined by the Tax Code of Ukraine (hereinafter – the Tax Code) (item 64.6 of the Tax Code), must be registered in the tax office. This requirement does not apply to agreements on the management of assets of mutual funds, banking management funds, construction financing funds and real estate funds established in accordance with the law.
Currently, the Tax Code has established the specifics of taxation for property management agreements only in relation to value added tax (hereinafter – VAT). Therefore, it is not necessary to register a property management agreement by an income tax payer or another tax payer. Such an agreement can be registered only by a VAT payer if there are grounds for it.
It will be reminded that according to item 181.1 of the Tax Code, a person is obliged to register as a VAT payer in the controlling body if the total amount from the supply of goods/services subject to taxation in accordance with Part V of the Tax Code, including using a local or global computer network, accrued (paid) to such a person during the last 12 calendar months, in total exceeds UAH 1 million (net of VAT).
Therefore, the VAT payer must be registered person – property manager for separate tax accounting of VAT on business transactions related to the use of property received under property management agreements, if the total amount of transactions (related to the use of property) for the supply of goods/services subject to VAT, including the use of local or global computer network, accrued (paid) to such a person during the last 12 calendar months, in total exceeds UAH 1 million (net of VAT). This conclusion is supported by the tax authorities in the category 101.02 “ZIR”.
Therefore, whether to register a property management agreement by a VAT payer or not should be decided by the property manager. And it will depend on whether such an agreement falls under the requirements for mandatory registration of a business entity as a VAT payer (item 181.1 of the Tax Code).
If the requirements for mandatory registration by a VAT payer under a property management agreement are not met (ie during the last 12 calendar months the total amount of transactions does not exceed UAH 1 million (net of VAT), then such an agreement is not required to be registered by a VAT payer. If the property manager is willing to do so, the VAT payer may voluntarily register such an agreement. The issue arises when the manager is already registered as a VAT payer at the time of concluding the property management agreement. In such a case it is advisable for such a manager to register the property management agreement as a VAT payer, so as not to lose a right to tax credit.
In addition, the owner of the real estate, the management of which is transferred, and the property manager must file tax form No. 20-ОПП indicating that certain property management has been transferred. Form No. 20-ОПП should be submitted within 10 working days after the transfer of property management.
