4.2 Problems of formation and use of the special fund of the Budget by institutions of higher education of Ukraine

The filling of the special fund significantly depends on the orders of business entities for educational services and for the implementation of research and development. However, such activity is not economically supported in our state. Consider encouraging businesses through tax breaks.

Tax regulation of business entities is regulated by the Tax Code of Ukraine (TCU). At present, the tools of tax incentives for businesses to spend money on education are not fully used. Therefore, it is considered important to amend the current rules of the TCU in order to increase the effectiveness of existing tax incentives in this area. In particular, the problems are as follows.

There are no incentives in the income tax to spend money on education for businesses whose total income for the previous year exceeds UAH 40 million.

It should be noted that starting from January 1, 2015, income taxpayers with a total income for the previous year of more than UAH 40 million determine the object of income tax by adjusting (increasing or decreasing) the pre-tax financial result (profit or loss), defined in the financial statements of the enterprise in accordance with national regulations (standards) of accounting or international financial reporting standards, on the differences that arise in accordance with the provisions of this Code.

Enterprises whose total income for the previous year is less than UAH 40 million do not make such adjustments and determine the object of income tax only on the basis of accounting data. These taxpayers can reduce the object of taxation by the amount of expenses transferred directly to higher education institutions and individuals who conduct training in these institutions. Therefore, the amount of the transferred funds for education of these taxpayers will reduce the income tax, which is a tax incentive to encourage these taxpayers to spend.

In contrast, «high-income» income taxpayers who adjust the pre-tax financial result do not have the opportunity to reduce the object of income tax by the entire amount of money spent on education.

This is due to the fact that according to the rules of paragraphs 140.5.9 TCU, such payers must increase the financial result of the tax (reporting) period by the amount of funds or value of goods, works performed, services provided, gratuitously transferred (transferred) during the reporting (tax) year to non-profit organizations included in the Register of non-profit institutions and organizations the date of such transfer of funds, transfer of goods, works, services (except for non-profit organization, which is an association of insurers, if the insurer’s participation in such association is a condition of such insurer in accordance with law, and non-profit organizations to which the provisions of subparagraph 140.5.14 of this paragraph), in excess of 4 percent of taxable income of the previous reporting year.

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