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trAre Months During Which Business Activities Are Suspended Taken into Account When Calculating the Average Monthly Number of Employees? – Official Clarification
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Are Months During Which Business Activities Are Suspended Taken into Account When Calculating the Average Monthly Number of Employees? – Official Clarification
An official clarification has been provided on the calculation of the average monthly number of employees for the purpose of applying the 75% income tax relief available to micro-enterprise entities.
AZE Finance reports that this was stated in the response to an inquiry addressed to the State Tax Service.
The inquiry explained that the taxpayer operated from January to April, suspended its activities until October, and resumed operations during the final three months of the year. Thus, the enterprise operated for a total of 8 months during the year, while its activities were suspended for 4 months. The question was whether the total number of employees should be divided by 8 or 12 when calculating the average monthly number of employees.
In its response, the State Tax Service stated that, under Article 106.1.20 of the Tax Code, legal entities classified as micro-enterprises are eligible for a 75% tax exemption on income derived from business activities, provided that their average monthly number of salaried employees is at least 3 and they have no outstanding mandatory state social insurance contributions.
It was noted that the average monthly number of salaried employees for the relevant year is generally determined by adding up the number of employees during the calendar year and dividing the total by 12.
How is the period of suspended business activity taken into account?
In its response, the State Tax Service specifically emphasized that, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, the average monthly number of salaried employees is determined based on the period of actual business activity.
Accordingly, when calculating the average monthly number of employees for taxpayers that have temporarily suspended their activities and subsequently resumed operations, the actual period of business activity is taken into account.
It was also noted that legal entities that fail to meet the conditions established for the tax relief and move from the micro-enterprise category to another business category in the following reporting year are entitled to a tax relief equal to 75% of the income tax calculated and paid based on the results of the previous three calendar years. This amount is deducted from their corporate income tax liabilities for the periods during which they belong to another business category.
Furthermore, this tax relief does not apply to income generated from transactions involving the issuance of invoices without the actual supply of goods.
An official clarification has been provided on the calculation of the average monthly number of employees for the purpose of applying the 75% income tax relief available to micro-enterprise entities.
AZE Finance reports that this was stated in the response to an inquiry addressed to the State Tax Service.
The inquiry explained that the taxpayer operated from January to April, suspended its activities until October, and resumed operations during the final three months of the year. Thus, the enterprise operated for a total of 8 months during the year, while its activities were suspended for 4 months. The question was whether the total number of employees should be divided by 8 or 12 when calculating the average monthly number of employees.
In its response, the State Tax Service stated that, under Article 106.1.20 of the Tax Code, legal entities classified as micro-enterprises are eligible for a 75% tax exemption on income derived from business activities, provided that their average monthly number of salaried employees is at least 3 and they have no outstanding mandatory state social insurance contributions.
It was noted that the average monthly number of salaried employees for the relevant year is generally determined by adding up the number of employees during the calendar year and dividing the total by 12.
How is the period of suspended business activity taken into account?
In its response, the State Tax Service specifically emphasized that, for the purposes of applying Articles 102.1.30 and 106.1.20 of the Tax Code, the average monthly number of salaried employees is determined based on the period of actual business activity.
Accordingly, when calculating the average monthly number of employees for taxpayers that have temporarily suspended their activities and subsequently resumed operations, the actual period of business activity is taken into account.
It was also noted that legal entities that fail to meet the conditions established for the tax relief and move from the micro-enterprise category to another business category in the following reporting year are entitled to a tax relief equal to 75% of the income tax calculated and paid based on the results of the previous three calendar years. This amount is deducted from their corporate income tax liabilities for the periods during which they belong to another business category.
Furthermore, this tax relief does not apply to income generated from transactions involving the issuance of invoices without the actual supply of goods.