Recipients of grants from the Ukrainian Startup Fund will pay 19.5% of the tax. And that is not all

Recently, the Ukrainian Startup Fund has been operating in Ukraine – it gives grants for development to local startups: $ 25,000 and $ 50,000. As AIN.UA was able to find out, a startup must pay tax from this grant.

During the study of the issue, the editor of AIN.UA managed to find out that the tax needs to be paid not only in the case of the USF – in Ukrainian jurisdictions, but the startup will also have to pay tax on any grant.

AIN.UA editor explains why so.

How did you know about the tax on grants?

In July last year, the Cabinet of Ministers launched the Ukrainian Startup Fund – this is a state program that gives grants to Ukrainian projects.

As it became known to AIN.UA, some startups have already received a grant for this program, but not in full: the amount was reduced due to taxes. Startups were provided with clarification from the STS, which explained the reason for such taxation.

Moreover, according to AIN.UA, some participants in the grant program do not yet suspect that they will not receive the full amount. The fact is that they talk about the existence of a tax almost at the very end – when a startup knows that it can count on a grant and is awaiting payment.

Why do I need to pay grant tax?

There is an explanation in the consultation of the State Tax Service, which provided (is at the disposal of AIN.UA) its Innovation Development Fund under the Ministry of Finance. It sounds like this:

If a startup receives a grant (a one-time non-refundable targeted payment to individuals and legal entities) and at the same time works as an individual entrepreneur, such a grant is taxed on general rules. That is, if the founder of the startup is FOP and he receives a grant, in this case he is considered an individual who received income not from entrepreneurial activity. This is the total income of an individual who is taxed according to the general rules.

18% of income tax and 1.5% of military duty are paid from such income.

If the recipient of the grant is a legal entity, income tax is paid from the grant:

USF gives grants in two volumes, but the amount will be less than expected:

• They promise $ 25,000, receive – $ 25,000 minus tax 19.5% = $ 20 125
• They promise $ 50,000, receive – $ 50,000 minus tax 19.5% = $ 40,250.

Exchange difference

Tax is not the only trouble waiting for a startup. The currency of Ukraine is hryvnia, which means that the grant amount is paid in hryvnias, not in dollars. And an important nuance is that a grant is paid at the rate at the time of application, and not at the time when the money comes to the account. As a result, due to exchange rate fluctuations that happen in Ukraine, a startup can receive even less money than expected at the very beginning. True, maybe more.

Some startups are also unaware of this.

The editors of AIN.UA talked with several startups about a tax that no one expected. Everyone admits that getting a significantly lower amount than you initially expected is unpleasant and strange that grants need to be paid tax. At the same time, one of AIN.UA’s interlocutors admitted: “they don’t look in the teeth for a gift horse” and they don’t hold grudges against the USF.

Source: ain.ua