LETTER OF THE STATE TAX SERVICE OF UKRAINE

of December 7, 2012 No. 3155/0/141-12/B/17-1114

Concerning taxation of personal income tax of the amounts of the cancelled debt

The State Tax Service of Ukraine considered the letter concerning the taxation income tax of the amounts of the cancelled debt under the agreement of the target non-interest loan allowed by the company to the worker for acquisition of the apartment and reports the following.

By subitem 14.1.56 of Item 14.1 of article 14 of the Tax Code (the Code is farther) it is determined that the income is 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.

The taxation of the income of physical persons is regulated by the Section IV "Income tax" of the Code. So, according to the subitem "d" of subitem 164.2.17 of Item 164.2 of Article 164 of the specified Section of the Code the total monthly (annual) taxable income of the taxpayer joins income gained by the taxpayer as the additional benefit (except cases, stipulated in Article the 165th this Code), in particular, in the form of the amount of debt of the taxpayer cancelled by the creditor according to its independent decision which is not connected with insolvency proceeding before the termination of term of limitation period.

According to subitem 14.1.47 of Item 14.1 of article 14 of the Code the additional benefits are means, material or non-material values, services, other income types which are paid (are provided) to the taxpayer by the tax agent if such income is not the salary and is not connected with accomplishment of obligations of labor hiring or is not remuneration under the civil agreements (agreements) signed with such taxpayer (except the cases which are directly provided by regulations of the Section IV of this Code).

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