VAT TAXATION OF TRANSACTIONS ON THE TRANSFER OF A REAL ESTATE OBJECT BY A COMPANY TO REPAY A DEBT TO ITS FOUNDER UNDER THE TAX CODE OF UKRAINE AND EU LAW

Abstract

The author notes in the article that the transaction of exchanging a real estate object for the amount of debt owed to the founder of the company, according to the provisions of the Tax Code of Ukraine, is a subject to VAT, provided that the party to the transaction is necessarily a VAT payer; the transaction is carried out within the framework of its economic activity. Property (real estate object) is subject to VAT taxation, except for specific cases provided for in tax legislation, when it is subject to exemption from VAT taxation. It is noted that compensation for a real estate object purchased on a loan in repayment of a debt can be money, other goods, services, and offset. Compensation in civil and tax relations is not limited exclusively to monetary form and can be carried out in various property forms. Compensation as a legal and economic category covers any counterproperty satisfaction that has a monetary value and is provided in exchange for transferred property, performed work or provided service. Therefore, money, goods, services and offset are equivalent forms of compensation, the difference between which lies only in the method of its implementation, and not in the legal or economic substance.
The fact that a legal entity (company) repays its obligations to its founder in kind (real estate) does not change the economic substance - it is still a negotiable supply of goods. Even if the transfer of real estate is initiated by the decision of the owner of the company, this company manages assets, fulfills civil obligations, disposes of real estate used in business or accounted for as an asset. This corresponds to the definition of economic activity.
According to the provisions of the Tax Code of Ukraine and the EU law, the transaction of transfer of a real estate object by a company in payment of a debt to the founder of this company is subject to VAT if such a transaction is carried out by a VAT payer (company), has signs of economic activity, and is not subject to benefits or exemption from VAT taxation, as also evidenced by relevant case law.