Changes in the legislation
On December 17, 2020, the Verkhovna Rada of Ukraine in the second reading and in general adopted the bill amending the Tax Code of Ukraine and other laws of Ukraine to ensure the collection of data and information collection, that is required for declaring single objects of taxation (draft bill №4065).
The document, in particular, postpones legal force of the certain provisions and amends changes, that were introduced into the Tax Code by laws №466 and №786-IX (implementation of the BEPS action plan, a new concept of taxpayers’ liability, changes to corporate income tax and simplified taxation system, etc.).
In addition to the abovementioned changes, one paragraph of the document introduces changes concerning the limitation of the real estate area that can be leased by a individuals – entrepreneurs (private entrepreneur) on the simplified taxation system.
Now therefore, starting from January 1, 2021, the norm came into force, which increased the areas limits, in accordance to which the single tax payer can lease up to 400 sq. m. of residential (instead of 100 sq. m. earlier) and 900 sq. m. (instead of 300 sq. m. previously) of non-residential immovable property. The area of land plots allowed for lease by a single tax payer remained unchanged – 0.2 hectares.
The changes in lease rules for private entrepreneurs
Such insignificant innovations to increase the area will not lead to changes in the beneficiary market. Those immovable property owners, who lease objects under direct contracts, will be able to partially come out of the shadows. While applying complex structures for the transfer of the immovable property for lease, which are regulated by law No. 1117, it does not matter.
The area limitation is the same for all, without exception, private entrepreneurs of 1-3 groups. But it is far from being the only thing; separate rules are established for each group.
Group 1. It is known that the payers of the 1st group can only be private entrepreneurs without employees, carry out exclusively retail sale of goods from trading places in the markets and / or carry out activities to provide household services to the population, and the volume of income of which during the calendar year does not exceed 167 sizes of the minimum wage established by law as of January 1 of the tax (reporting) year or UAH 1002,000 (subparagraph 1 of paragrap 291.4 of the Tax Code).
Оренди в Переліку дозволених для ФОП-єдинників побутових послуг населенню, на жаль, немає. Звідси випливає невтішний висновок: єдиноподатники 1 групи не можуть здавати в оренду власне майно.
Group 2. Private entrepreneurs of 2nd groups can be entrepreneurs who employ no more than 10 people at a time during the calendar year, and their income does not exceed 834 minimum wages, or UAH 5,004,000 (subparagraph 2 of paragraph 291.4 of the TCU). Among the permitted activities is the provision of services to the population and other single tax payers. And since the lease of property for tax legislation 0 is nothing but a service, single taxpayer of 2nd group can transfer real estate for lease, but (!) only:
- to other single taxpayers and the population and
- in compliance with the area restrictions.
Accordingly, it is not possible to lease the immovable property for payers of single tax of 2 group, for example:
a) enterprises-payers of income tax;
b) non-profit organizations;
c) private entrepreneurs in the general system of taxation;
d) natural persons engaged in independent professional activity;
e) non-resident individuals
Хай там як, перш ніж здавати в оренду нерухомість, потурбуйтеся про те, щоб відповідний вид діяльності фігурував у Реєстрі платників ЄП.
Group 3. Single tax payers of 3rd group are, in particular, private entrepreneurs, whose income during the calendar year does not exceed 1167 minimum wages (subparagraph 3 of subparagraph 291.4 of the TCU). Moreover, there are no restrictions on the type of activity, the number of employees or counterparts. Private entrepreneurs – single tax payers of 3rd group 3 have the right to lease their property to anyone.
Що ж: ФОП – єдиноподатники групи 3 мають право здавати своє майно в оренду будь-кому. Головне – дотриматись обмеження за площею.
The main rule is to comply with the area restrictions. And there is a way out in regard of the limitation of areas. Registration of a legal entity, transfer of the title of owner of immovable property to this legal entity allows you to lease immovable property without restrictions.
When and how much?
The leased object itself may have a larger area than it is established by law No. 1117. The restriction applies only to the part that is leased. That means, the fact that a person owns an object with an area above the norm is not enough for this. For the formal violation of the conditions, it is necessary to contract a large area.
Inspectors often neglect this formality and, having found immovable property in the ownership of the private entrepreneur with an area above the established norm, they no longer investigate which part is actually leased and automatically record violations of the tax law.
На захист рантьє варто зазначити, що суди доходять одного й того ж висновку: наявність у ФОП права власності на об’єкт нерухомості площею, що перевищує встановлені ПКУ норми, ще не говорить про те, що вона була здана в оренду.
The tax authorities must establish the facts of the provision of immovable property for lease in area above the norm, as well as to find out all the circumstances of such transactions: the area of the leased immovable property, on the basis of which documents and to which individuals / legal entities the property was transferred.
In the case of leasing several objects, the areas are summed up and their total area should not exceed the eligible one.
For example, there are three objects of non-residential properties: 250 sq. m., 300 sq. m. and 800 sq. m., that is, their total area exceeds the eligible – 900 sq. m. Therefore, leasing three premises in full and at the same time staying on the simplified taxation system are mutually exclusive things. And the tax law does not prohibit to lease the any one of them.
In addition, the restrictions on various types of immovable property are not mutually exclusive. That means, you can lease an apartment, a commercial warehouse and a land plot within the limits of each type.
The only and having no alternative consequence of violation of the limitation on the area of leased immovable property for privat entrepreneurs is the payment of a tax in the amount of 18% and 1.5% of the military tax on the amount of income received with violations and the obligation to move to the general taxation system from the 1st day of the month following the violation.
As another option for solving the problem with restrictions, it is quite often proposed to lease the part of the object of immovable property (within the limits established by this subparagraph) on behalf of the privat enterpreneur, and everything from above – on behalf of an ordinary natural person.
Natural persons without the status of an entrepreneur freely lease any area, while the tax rate is significant compared to the only single tax – 18% of income tax and 1.5% of military tax.
Therefore, while there is such a big difference between the tax rates for ordinary citizens and entrepreneurs, immovable property owners will look for more complex structures for organizing a bunificiary business in Ukraine.