Very often there are situations when the company donates its fixed asset (hereinafter – FA) to another owner. It can be both a legal entity and an individual. There can be many reasons for such a generous act, but the appropriate actions must be properly reflected in the accounting of the donor company.
Registration of transactions
To donate the FA, company head must make the appropriate decision. It is issued by drawing up an order (instruction) of the director of the enterprise or the minutes of the meeting of owners of the enterprise. Next, the company should enter into a gift agreement with the person to whom the FA is donated. To transfer FA, make the act of acceptance-transfer (internal transfer) of fixed assets (the form is approved by Order of the Ministry of Finance No. 818 of September 13, 2016). Data from this act are entered into the Inventory card of the FA account.
Accounting
In the case of gratuitous transfer of health FA, it is not required to transfer it to non-current assets held for sale. The fact is that such an asset in the case of gratuitous transfer does not meet the requirements of item 2 of part ІІ of NAS 27.
When donating an asset, it should be written off. Therefore, the company must perform the following transaction (item 33 of NAS 7, item 40 of Recommendations No. 561):
- write off the amount of accumulated depreciation by carrying out Dt 131 – Ct 10. At the same time, since depreciation on the outgoing asset ceases to accrue from the month following the month of disposal of FA, such conduct should be made taking into account depreciation in the month of transfer of FA;
- attribute the residual value of the donated object to the costs of Dt 976 – Ct 10.
Since FA is donated, the company will not lose income here (item 5 of NAS 15).
Tax accounting
Income tax
Income taxpayers who are low-income reflect in tax accounting transactions for the donation of FA in accordance with accounting rules. The fact is that such income taxpayers determine the object of taxation, ie the financial result before tax, only on the basis of accounting data without adjusting it for tax differences contained in part III of the Tax Code.
If the FA is donated by a high-income enterprise or a low-income volunteer, they must apply tax differences during the implementation of this transaction, as well as during the ise of the FA, namely:
1) from the month following the month of donating of FA, the company must stop accruing depreciation on FA in tax accounting. Therefore, such FA will not participate in depreciation differences from this month;
2) in the case of donating of FA, they must apply tax differences, which are reduced to the fact that their financial result before tax will have to:
- increase by the amount of the residual value of the FA, determined in accordance with NAS or IFRS (para. 4 of item 138.1 of the Tax Code);
- reduce by the amount of the residual value of the FA, determined according to the rules established by Art. 138 Tax Code (para, 3 of item 138.2 of the Tax Code);
3) in case of gratuitous transfer of non-productive FA, the pre-tax financial result is only increased by the amount of the residual value of the FA, determined in accordance with NAS or IFRS (para. 5 of item 138.1 of the Tax Code).
It is also worth considering who is FA donated to. If they are income taxpayers or individuals, then this is the end of all the differences. If such FAs are given to individuals who are not payers of income tax, ie payers of the single tax (except for natural entities), and payers of this tax at zero rate, then high-income and low-income volunteers must increase the financial result by the amount of such FA (by its book value). This adjustment is made at the end of the month in which the FA was transferred.
The only exception is the free transfer of FA to:
- non-profit organizations entered in the Register of non-profit institutions and organizations. In this case, you can reflect the costs within 4% of taxable income of the previous reporting year. If this limit is exceeded, the financial result will have to be increased by the amount of such excess (subitem 140.5.9 of the Tax Code). If the company has a loss, then the cost should exclude the entire cost of FA without reference to the 4% limit;
- subjects of physical culture and sports, namely children’s and youth sports schools, centers of Olympic training, schools of higher sportsmanship, centers of physical culture and sports for individuals with disabilities, sports federations of Olympic sports, which are non-profit organizations included in Register of non-profit institutions and organizations. In this case, you can reflect the costs within 8% of taxable income of the previous reporting year (subitem 140.5.14 of the Tax Code). If this limit is exceeded, the financial result will have to be increased by the amount of such excess. If the company has a loss, then the cost should exclude the entire cost of FA without reference to the 8% limit.
For single tax payers of groups 3 and 4, the free transfer of FA will pass tax accounting.
VAT
Free transfer of health facilities falls under the concept of supply, and therefore such a transaction is subject to VAT (subitem ‘a’ of item 185.1 of the Tax Code). That is, in the case of a free transfer of FA, the VAT payer will have to accrue tax liabilities from this tax.
In the case of accrual of tax liabilities, it should be borne in mind that such an object will be transferred at zero cost. And for all supply transactions, a minimum VAT base is set. Thus, for the supply of the FA, the minimum tax base is the book (residual) value of the FA according to the accounting data, which has developed as of the beginning of the reporting (tax) period during which such transfer is made. As the asset is transferred at zero value, tax liabilities should be accrued in accordance with the minimal base.
That is, the VAT payer will have to draw up two tax invoices:
- the first – for the amount calculated according to the delivery price. In the case of free delivery, it will be equal to “0”;
- the second with the type of reason “15” – the amount calculated in accordance with the excess of the book (residual) value over the actual price. How to fill out this tax invoice is described above about the sale of FA.
Both tax invoices should be registered in the Unified Register of Tax Invoices.
There is also good news. In this case, tax liabilities in accordance with item 198.5 of the Tax Code do not need to accrue (letter of State Tax Service No. 2383/ІПК-28-10-30-02-11 dated June 10, 2020).
PIT
If the FA is donated by the enterprise to a natural person, then it is subject to personal income tax. But here it is worth remembering that subitem 165.1.39 of the Tax Code removes from the taxable income of an individual non-monetary gifts, the value of which does not exceed 25% of one minimum wage (per month), established on January 1 of the reporting tax year. In 2021, this limit is set at UAH 1,500 per month. At the same time, for tax purposes, the value of a non-monetary gift should be determined at normal prices (item 164.5 of the Tax Code). If the FA is donated to an individual, its value will definitely exceed this limit. Therefore, from the amount of exceeding the tax-free limit, increased by the “natural” coefficient (1,219512), PIT should be deducted as an additional benefit (item 164.5, para. “e” of subitem 164.2.17 of the Tax Code).
The tax agent in the case of donating the FA to individuals is the company. Therefore, the PIT should be deducted from the value of the gift given by donor of the FA.
When donating an individual, the company should display information about such actions in the form 4ДФ. In it the non-taxable gift (its part) is specified with a sign of the income “160”, and the taxable (its part) – with a sign of the income “126”.
Military levy
When a person receives the FA, they should be taxed by the military levy (hereinafter –ML) by analogy with the taxation of personal income tax. That is, from the amount of which in accordance with subitem 165.1.39 of the Tax Code PIT is not charged (UAH 1,500 per month in 2021), should not be withheld and ML (item 1.7, item 16, section 10, chapter XX of the Tax Code).
ML must be deducted from the amount exceeding the tax-free limit of the gift. In addition, withhold ML from the taxable amount to no coefficients must be used (ie from the “net” amount). The Tax Code does not provide for a natural coefficient for such cases.
The cost of the donated FA should be reflected in the form 4ДФ.
