LETTER OF THE STATE TAX SERVICE OF UKRAINE

of June 25, 2012 No. 11180/6/15-1415

About consultation provision

The State Tax Service of Ukraine considered the letter concerning forming of the income in case of reduction of the authorized capital and reports.

According to item 1 of Art. 144 of the Civil Code (CC) the authorized capital of limited liability company consists of deposits of his participants. The size of the authorized capital equals to the amount of cost of such deposits.

According to item 3 of Art. 144 of group of companies the authorized capital of limited liability company is subject to payment by members of society before the termination of the first year from the date of state registration of society.

If participants before the termination of the first year from the date of state registration of society did not bring (not completely made) the contributions, general meeting of participants accepts one of such decisions: about reduction of the authorized capital and about determination of procedure for redistribution of parts in the authorized capital.

The item 4 of Article 144 of group of companies provides that if after the termination of the second or each following financial year net assets value of limited liability company appears less from the authorized capital, society shall declare reduction of the authorized capital and register corresponding changes to the charter in accordance with the established procedure if participants did not make the decision on introduction of additional deposits.

Reduction of the authorized capital of limited liability company is allowed after the notification according to the procedure, established by the law, all his creditors. In this case creditors have the right to require early termination or accomplishment of the corresponding obligations of society and compensation of losses by it (item 5 of Art. 144 of group of companies).

According to Art. 52 of the Law of Ukraine of 19.09.91 No. 1576-XII "About economic societies" the changes in the charter connected with change of the size of the authorized capital and/or with change of list of participants are subject to state registration in the procedure established by the law.

According to item 137.16 of Art. 137 of the Tax code of Ukraine (dalshekodeks) the date of receipt of other income is date of their origin according to provisions (standards) of financial accounting if another is not provided by regulations of this Section.

According to subitem 14.1.56 of item 14.1 of Art. 14 of the Code the income - total of income of the taxpayer from all types of activity received (added) during the accounting period in cash, material or non-material forms as in the territory of Ukraine, its continental shelf in exclusive (sea) economic zone and beyond their limits.

According to item 5 of the Provision (standard) of the financial accounting 15 "Income" approved by the order of the Ministry of Finance of Ukraine of 29.11.99 No. 290, the income is recognized during increase in asset or reduction of the obligation that causes growth of equity (except for growth of the capital at the expense of fees of members of the company) provided that assessment of the income can be authentically determined.

Taking into account provisions which govern the civil relations and also that in case of reduction of the registered authorized capital the income does not arise implementation of such transaction does not lead to increase in the income by rules of tax accounting.

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