Tax implications for an LLC when contributing additional capital without increasing the authorized capital

According to the Individual Tax Consultation Decision (ITCD) from the State Tax Service dated December 19, 2023, No. 4760/ITCD/99-00-21-02-02, it is stated that the provisions of the Tax Code do not provide for differences in adjusting the financial result before taxation in the case of a founder contributing additional capital without increasing the authorized capital of the company and subsequently leaving the company.

These transactions are reflected in accordance with accounting rules when forming the financial result before taxation.

The operation of legal or natural persons-entrepreneurs who are VAT payers, involving the transfer of contributions in the form of goods to the additional capital of a limited liability company under paragraph 185.1 of Article 185 of the Tax Code is considered a supply of goods subject to VAT, taxed at a rate of 20 percent.

Similar operations involving the supply of goods, if conducted by a resident non-VAT payer, under paragraph 185.1 of Article 185 of the Tax Code, are not subject to VAT.

Therefore, as a conclusion, operations involving the transfer of contributions in the form of monetary funds to the additional capital of a limited liability company by legal and/or natural persons-entrepreneurs are not subject to VAT.