Author: Maryna Pokotylo, Partner at F&P
Individuals who have chosen the simplified taxation system have defined rules regarding income formation. In particular, their income is considered to be any profit received in monetary (cash or non-cash) form, as well as in material or intangible forms.
If a third group taxpayer works under a commercial agency contract, their income is the remuneration they receive for intermediary services, not the total amount of funds that pass through them. Intermediary activity implies that the entrepreneur acts in the interest of another person (the principal), helping to conclude agreements, fulfill assignments, or sell goods.
The legislation clearly states that such individuals cannot be compensated for their services in kind (non-monetary form). All payments must be made exclusively in money – cash or through bank accounts.
However, in practice, questions often arise regarding the ability of such individuals to conduct offsetting in settlements.
Mutual offset is a method of settlement where two parties offset reciprocal obligations to each other without transferring real money.
Cash settlements are payments made in cash by business entities and individuals for sold products (goods, completed works, provided services), as well as for transactions that are not directly related to the sale of products (goods, works, services) and other property. In turn, cashless settlements are the transfer of funds from the accounts of payers to the accounts of recipients, as well as the transfer by payment service providers of funds deposited by payers in cash to the accounts of recipients.
Considering the legal norms provided, it can be concluded that the offset of monetary claims conducted through banking institutions is a cashless transaction, which is considered a monetary transaction.
A similar position was established by the Supreme Court in the ruling dated 20.10.2020 No. 822/2972/13-a, according to which: “calculations carried out by the plaintiff through mutual settlement are considered to be conducted in monetary form.”
Thus, legal entities and individual entrepreneurs who are single tax payers of the third group do not have the right to engage in barter transactions, including settling debts in any way other than monetary.
In turn, withholding the commission of a commercial intermediary and/or conducting a mutual settlement is a monetary form of payment that is not prohibited by the Tax Code.
