A single tax payer received property for free under a loan agreement. Does this create taxable income?

The Main Department of the State Tax Service in the Ivano-Frankivsk region clarified whether an individual entrepreneur who is a single tax payer (excluding e-residents) generates income when receiving property for free use under a loan agreement.

According to Article 292 of the Tax Code of Ukraine, for an individual entrepreneur who is a single tax payer, income is defined as the income received during the tax (reporting) period in monetary form (cash and/or non-cash); and in material or non-material form, as specified in paragraph 292.3 of Article 292 of the Tax Code. It is important to note that passive income received by such an individual in the form of interest, dividends, royalties, insurance payments, reimbursements, budget grants, as well as income from the sale of movable and immovable property owned by the individual and used in business activities, is not included in the income.

Furthermore, according to paragraph 292.3 of Article 292 of the Tax Code, the value of goods (works, services) received free of charge during the reporting period is included in the income of the single tax payer.

Goods (works, services) provided to the single tax payer under written donation agreements and other written contracts, which are executed in accordance with the law and do not stipulate monetary or other compensation for the value of such goods (works, services) or their return, as well as goods transferred to the single tax payer for safekeeping and used by that single tax payer, are considered received free of charge.

Consequently, since the transfer of property to an individual entrepreneur under a loan agreement does not involve the transfer of ownership rights to such property to the individual entrepreneur who is a single tax payer, income in the sense of paragraph 292.1 of Article 292 of the Tax Code does not arise for such an entrepreneur.