Publication date: 15.02.2024
I am studying in the third year of the State University of Economics and Technology.I specialize in contractual, economic and corporate law, in particular, I provide consultations and write articles.
When carrying out entrepreneurial activity, there may be cases when additional financial income is urgently needed.
- In addition to loans, the current legislation provides for another instrument that will help meet the needs of FLPs or legal entities, namely, repayable financial assistance.
- Repayable financial assistance should be considered a certain amount of funds received by the taxpayer for use in accordance with the concluded contract, which does not provide for the accrual of interest or other compensation for the use of the provided funds.
- Such assistance must be subject to mandatory return.
- Repayable financial assistance can be provided both by FLP (except for those that are on the simplified taxation system), and by legal entities or individuals.
Features of the agreement on repayable financial assistance :
- Based on the above-mentioned legislative definition of repayable financial assistance, it can be argued that the process of its provision must be regulated by the relevant contract.
- The repayable financial assistance contract should be distinguished from the loan contract, because in any case, the loan will not accrue interest for the use of the funds.
First of all, you should pay attention to the form of the transaction that will be concluded between the parties.
- Yes, according to Art. 208 of the Civil Code of Ukraine must necessarily conclude contracts between legal entities, between an individual and a legal entity, as well as contracts between individuals, if the amount for which they are concluded is 20 times or more than the tax-free minimum income of citizens (340 UAH) .
- Well, in general, contracts providing for the transfer of certain sums of money should be concluded precisely in writing, as this will provide certain guarantees of protection.
Separate attention should be paid to the content of the transaction, namely its essential conditions: object, price (a clearly defined amount of assistance) and term of validity.
It is important to point out that the amount of funds provided as a repayable financial assistance must be returned within the terms specified by the contract. It should be noted that the return period should not exceed 12 months, as this will negatively affect the aspect of taxation. In addition to essential conditions, the contract should specify the procedure for providing funds (in cash or non-cash form), the procedure for returning the amount provided, and the condition of responsibility for non-fulfillment of contractual obligations.
As for the consequences assumed for the delay in the return of financial assistance, it can be noted that in this case the assistance will acquire the characteristics of non-returnable and will be included in the profit of the enterprise to which it was provided, that is, subject to taxation.
Also, don't forget about financial monitoring, because certain restrictions have been established for cash settlements of legal entities with individuals and criteria for the riskiness of financial operations.
The main aspects of repayable financial assistance taxation:
- First, it should be noted that the receipt of repayable financial assistance will not cause tax obligations, because according to the general definition, financial assistance provided on an interest-free basis to the payer of a single tax will not be included in the profit and, accordingly, will not be subject to taxation, if such assistance was returned within 12 months from the day of its provision.
- If the assistance provided has the characteristics of non-refundable and was included in income, then it is subject to personal income tax (18% rate) and military service (1.5% rate).
- As for other taxes, the provided financial assistance will not be subject to VAT, will not be subject to military levy and ESR. At the same time, it is necessary to display the provided repayable financial assistance in the 4DF application.
- In the case of the partial return of the assistance provided, the 4DF application must reflect the actually returned funds for the reporting month.
Legal services for business when concluding a repayable financial assistance contract:
A business lawyer can be useful when preparing a draft contract. It is extremely important to pay attention to legal subtleties when forming the content of the transaction, because every double interpretation, every condition that contradicts the requirements of the current legislation can cause negative consequences for the parties, and therefore the legal protection of business becomes extremely important. A lawyer for business will take into account all wishes, form a draft contract and, as a result, ensure a reliable settlement of legal issues and the achievement of the desired result by the parties, and eliminate unnecessary costs of time and money.
