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Tax treatment after a capital reduction in Ukraine

27 Oct 2016

 

Tax treatment after a capital reduction in Ukraine

The reduction of the authorized capital is an ordinary procedure for the legal entities. Generally speaking, the capital reduction is the process of decreasing a company´s shareholder equity through share cancellations and share repurchases. The reduction of capital is done by companies for numerous reasons including increasing shareholder value and producing a more efficient capital structure.

But, what are the consequences ? We have summarized in this article the tax treatment after a capital reduction:

1. Income tax

If the share capital of the legal entity income tax does not arise.Thus, in the case of reducing the share capital, section III of the Tax Code of Ukraine provided the adjustment of financial result before tax for the difference, including when leaving one of the founders / participants.

2. VAT

Not taxable payment of share dividends and share capital in cash and VAT (pp. 196.1.6 TCU).

 3. PIT and military collection

If a member / founder is a natural person, in this case, there is no taxable income, if there is a reduction of share capital, return of share of participants / founders of the cost previously made their contributions. It occurs only in case of alienation of corporate rights ( selling them to another person).

 

If you have any question, please, feel free to contact us. We will be pleased to help you!

 

Contact:

Yaroslav Kalakura

Corporate services consultant, Accace Ukraine

Yaroslav.Kalakura@accace.com

+380 445693310


Read more about Ukraine:
  • Economic activity and royalties of a non-resident in Ukraine
  • If you have submitted your Ukrainian tax reports late, you could expect a tax inspection

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About Accace

Originally established in Central and Eastern Europe in 2006, Accace ranks among the leading outsourcing and consultancy providers in the region. Engaging over 600 experts, we have vast experience with handling small to large scale, multi-country outsourcing projects and providing a comprehensive range of our services to over 2,000 customers.

About Accace Circle

Accace operates internationally as Accace Circle, a co-created business community of like-minded BPO providers and advisors who deliver outstanding services with elevated customer experience. Covering almost 40 jurisdictions with over 2,000 professionals, we support more than 10,000 customers, mostly mid-size and international Fortune 500 companies from various sectors, and process at least 170,000 pay slips globally.

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