Question: An individual entrepreneur applies the SNR based on a simplified declaration. This year, he plans to sell property (an operating store) received as a gift in August 2019. Does property income arise and can an assessment be made?
Answer: In this case, it is necessary to be guided by Article 334 of the Tax Code. In accordance with paragraph 1 of this article, other assets include assets that are not inventories and claims, including fixed assets used in entrepreneurial activities.
When selling other assets of an individual entrepreneur using a special tax regime for small businesses or for peasant or farm households, the increase is determined for each asset as a positive difference between the selling price (cost) and the original cost.
If the other asset was received free of charge, for the purposes of this article, the original cost is the cost of this asset included in the taxable object in accordance with paragraph 2 of Article 681 of the Tax Code in the form of property received free of charge.
In this case, the property received as a gift was subject to inclusion in the taxable object for the individual income tax for the relevant tax period for a taxpayer applying the SNR based on a simplified declaration.
Based on the above, given that real estate with the intended purpose of a store was received in August 2019 as a gift free of charge, and the value of the asset was not included in the taxable object in accordance with paragraph 2 of Article 681 of the Tax Code, accordingly, in the case under consideration, the income from the increase in value from the sale of other assets by an individual entrepreneur applying the special tax regime for small businesses is recognized as the sale price of such property.
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At the same time, in accordance with paragraph 5 of Article 334 of the Tax Code, the market value according to the valuation report is applied when selling other assets received as an inheritance, charitable assistance, with the exception of receiving property free of charge.
Individual income tax is calculated at a rate of 10% of the amount of sale of real estate. The declaration on individual income tax on the basis of paragraph 1 of Article 364 of the Tax Code is submitted to the tax authority at the place of location (residence) no later than March 31 of the year following the reporting tax period. As part of the general declaration, individuals who have received property income submit a declaration of income and property form 270.00 no later than September 15 of the year following the reporting year at the place of residence (stay).