How an Owner Can Fund a Company Account: Repayable Financial Assistance, Capital Contributions, Advances, and Taxes

When a company urgently needs money for rent, taxes, salaries, purchasing goods, or other operating expenses, the owner should not simply transfer funds without proper documentation. For temporary financing, the most convenient option is usually an interest-free loan, which meets the definition of repayable financial assistance for tax purposes: funds are provided under an agreement, without interest or any other charge for their use, and must be repaid. For a legal entity paying the single tax, it is particularly important to repay such assistance within 12 calendar months from the date of receipt; otherwise, the outstanding amount is included in taxable income.

If the owner does not intend to recover the money, it is more appropriate to formalize it as a capital contribution rather than disguise it as payment for nonexistent goods or services. For a limited liability company (LLC), the law allows the articles of association to provide for additional capital separate from the registered share capital, without changing the nominal value of ownership interests. However, for an LLC paying Group III single tax, this option carries a separate tax risk: the State Tax Service of Ukraine (STS) considers that, under certain circumstances, a contribution to additional capital without changing the registered share capital may be treated as non-repayable financial assistance and included in the single-tax base. Contributions specifically to registered share capital are expressly excluded from the income of single-tax payers.

Legal Ways to Contribute Money to a Company

The main options depend on whether the company must repay the owner and the purpose for which the funds are provided.

What Is Repayable Financial Assistance?

The Tax Code defines repayable financial assistance as funds received by a taxpayer for use under an agreement that:

• does not provide for the accrual of interest;

• does not provide for any other compensation for the use of the funds;

• establishes an obligation to repay the money received.

Therefore, «repayable financial assistance» is primarily a tax-related definition. Under civil law, such a transaction is structured as a loan agreement: one party transfers ownership of money to another, and the borrower undertakes to repay an equivalent amount.

For a company, this means that the money received can be spent on business needs: rent, taxes, payments to suppliers, salaries, equipment purchases, and other expenses. At the same time, however, the company incurs a liability to the person who provided the funds.

Why the Agreement Must Explicitly State That the Loan Is Interest-Free

As a general rule, the Civil Code gives the lender the right to receive interest unless otherwise expressly provided by the agreement or law. Therefore, to qualify specifically as repayable financial assistance, the tax-safe wording must explicitly state that no interest, commissions, remuneration, or any other charges for using the money will accrue. Otherwise, the transaction may not meet the definition of repayable financial assistance under Subparagraph 14.1.257 of the Tax Code of Ukraine.

It is not sufficient to simply title the document «Repayable Financial Assistance Agreement». The actual terms of the agreement are what matter.

Who Can Provide Money to a Company?

The lender may be:

• a company founder or participant acting as a private individual;

• a director or another individual;

• another legal entity;

• in appropriate cases — an entrepreneur, although risks must be assessed separately for Sole Proprietorships under the simplified taxation system.

For a founder who is also registered as a Sole Proprietorship paying the single tax, the most controllable approach is to clearly separate the personal transaction from business activities: the agreement is concluded by the individual, and the funds are provided as personal funds rather than as part of the Sole Proprietorship's business activities. The reason is the longstanding dispute over whether providing financial assistance by an entrepreneur paying the single tax can be considered financial activity incompatible with the simplified taxation system.

In its ruling of April 21, 2026, in case No. 280/7335/24, the Supreme Court disagreed with the tax authority in a specific situation where an individual provided personal funds under interest-free agreements, and the transactions showed no signs of profit-making or redistribution of borrowed funds. This ruling is important, but it does not mean that every Sole Proprietorship is automatically free from risk. Therefore, the contractual party's legal status and the source of funds must be documented unambiguously.

What to Check Before Entering into an Agreement with the Owner

For an LLC, it is necessary to check not only the tax rules but also the articles of association. The Law on LLCs allows a special approval procedure to be established for significant transactions. If the value of the property, works, or services covered by a transaction exceeds 50% of the company's net assets according to its most recently approved financial statements, the decision to approve such a transaction is made by the general meeting of participants, unless otherwise provided by the articles of association.

Therefore, before obtaining a substantial loan from a participant, it is advisable to check:

1. the LLC's articles of association;

2. the most recently approved financial statements;

3. the director's authority to sign the agreement;

4. whether a resolution of the general meeting is required;

5. who exactly acts as the lender — an individual, a Sole Proprietorship, or a legal entity.

Proper documentation helps protect the company against subsequent disputes concerning the validity of the agreement and the director's authority.

What to Include in a Repayable Financial Assistance Agreement

The agreement should include:

• full details of the parties;

• the amount of assistance or a maximum limit if funds will be provided in installments;

• the procedure and method for transferring the funds;

• an explicit provision stating that no interest is charged;

• an explicit exclusion of any commissions or other charges for using the money;

• the company's obligation to repay the funds;

• a specific repayment deadline;

• the possibility of early repayment;

• the payment details for repayment;

• the procedure for changing the repayment deadline and other terms;

• the parties' liability;

• the date and signatures of the parties.

The Civil Code requires a loan agreement to be in writing if the amount is at least ten times the non-taxable minimum income of citizens or, where the lender is a legal entity, regardless of the amount. A document confirming the actual transfer of money is also important because a loan agreement is considered concluded when the money or other fungible property is transferred. The Civil Code does not establish a general requirement to notarize an ordinary monetary loan agreement. Civil Code of Ukraine No. 435-IV, Articles 1046–1049

Is It Mandatory to Specify a Repayment Deadline?

It is preferable to specify the repayment deadline explicitly. However, the absence of a repayment date does not, in itself, turn the loan into non-repayable assistance.

If the agreement does not establish a repayment deadline or makes repayment due upon demand, the Civil Code provides that the loan must be repaid within 30 days from the date the lender makes the demand, unless otherwise stipulated by the agreement. For single-tax payers, this does not override the separate 12-calendar-month tax rule. Civil Code of Ukraine No. 435-IV, Article 1049

How to Transfer Repayable Financial Assistance Correctly

The most convenient approach is to transfer the funds by bank transfer to the company's current account.

For example, the payment reference may state:

«Repayable financial assistance under Agreement No. ___ dated ___. Interest-free».

The payment reference must correspond to the agreement. A loan should not be described as «payment for goods», «payment for services», or «sales revenue» if it is actually financing provided to the company.

The bank statement, together with the agreement, will confirm the actual transfer of funds.

Can Financial Assistance Be Provided in Cash?

Yes, but a bank transfer generally provides a simpler documentary trail for a company.

National Bank of Ukraine Regulation No. 148 limits cash settlements within one day:

• between business entities — up to and including UAH 10,000;

• between a business entity and an individual — up to and including UAH 50,000.

Payments exceeding these limits must be made using permitted cashless methods or by depositing cash with a payment service provider for subsequent transfer to the recipient's account.

If an individual founder transfers cash directly to a legal entity's cash office, the company must document the cash receipt using the appropriate cash document and record the transaction in its cash accounting records in accordance with Regulation No. 148.

Is an ECR or PECR Required When Receiving Repayable Financial Assistance?

Repayable financial assistance is not payment for goods sold or services provided. Therefore, receiving or repaying a loan does not constitute the type of settlement transaction for which the ECR Law requires fiscalization of a sale.

This approach is also supported by court practice. In its ruling of March 11, 2025, in case No. 914/2197/18, the Supreme Court agreed that depositing cash to repay previously received repayable financial assistance did not constitute payment for goods or services. Therefore, there was no obligation to use an ECR when receiving such funds.

This does not eliminate the requirement to document cash transactions. ECRs/PECRs and cash documents perform different functions: the absence of an obligation to issue a fiscal receipt does not mean that cash can be accepted without properly recording the cash transaction.

Taxation of Repayable Financial Assistance Received by a Company

Company Paying Corporate Income Tax

The Tax Code of Ukraine does not require a special adjustment to the financial result solely because repayable financial assistance has been received. The transaction is recorded according to accounting rules. The funds received create an asset — cash — and simultaneously a liability to the lender. Therefore, the receipt of repayable financial assistance itself does not constitute ordinary income from the company's activities.

For long-term liabilities, the relevant accounting measurement rules must be applied separately in accordance with the standards used by the company. The STS expressly states that the Tax Code does not establish a separate tax difference for assistance received from a founder for a period exceeding 12 months: the recognition of discounting and related income or expenses is determined by accounting rules.

Therefore, the rule that «assistance automatically becomes income after 12 months» cannot be applied to an ordinary corporate income tax payer. The 12-month restriction is primarily established for single-tax payers.

Company Paying Group III Single Tax

For a legal entity paying the single tax, the amount of repayable financial assistance received is excluded from income only if it is repaid within 12 calendar months from the date of receipt.

If the funds are not repaid within this period, the outstanding amount is included in the single-tax payer's income after the 12 calendar months have elapsed.

If assistance is received in several installments, it is advisable to track each actual receipt separately to monitor repayment deadlines, since the Tax Code ties the 12-month period to the date the funds are received.

VAT

Receiving or repaying repayable financial assistance does not, in itself, constitute a supply of goods or services. Therefore, such a transaction is not subject to VAT. The STS takes the same position regarding non-repayable financial assistance where the transaction involves the transfer of money rather than payment for a supply.

Personal Income Tax and Military Levy When Repaying the Owner

If an individual has provided repayable financial assistance to a company, repayment of the principal amount is excluded from that individual's taxable income under Subparagraph 165.1.31 of the Tax Code of Ukraine.

At the same time, the legal entity, acting as a tax agent, must report the principal amount repaid to the individual in Annex 4DF using income code «153». Following the introduction of new reporting forms, the STS has confirmed the use of this code.

What Happens If the Company Does Not Repay the Assistance on Time?

The consequences should be considered separately under civil law and tax law.

If the contractual repayment deadline has passed, the company is in default on its obligation to the lender. The fact of late repayment does not automatically convert the debt into a gift.

For a corporate income tax payer, subsequent accounting depends on the legal and accounting treatment of the liability: repayment, extension of the term, debt forgiveness, termination of the obligation on other lawful grounds, and so on. The Tax Code does not establish a rule under which ordinary repayable assistance automatically becomes income after 12 months.

For a legal entity paying the single tax, a special rule applies: if the assistance is not repaid within 12 calendar months from the date of receipt, the outstanding amount is included in income regardless of any longer term agreed by the parties in their civil-law agreement.

Therefore, a single-tax payer gains no tax advantage by concluding an agreement for two or three years and assuming that this will postpone taxation.

Contribution to an LLC's Additional Capital Without Increasing Registered Share Capital

The Law on LLCs allows the articles of association to provide for the creation of additional capital through participants' contributions, separately from registered share capital.

Such a contribution:

• may consist of money, securities, or other property;

• does not change the nominal value of ownership interests;

• does not change the amount of registered share capital;

• is made pursuant to a resolution of the general meeting specifying the contribution amount;

• may be subject to additional legal provisions established in the articles of association and/or a corporate agreement.

This mechanism is available only when provided for in the articles of association. If the articles do not contain such a provision, they must first be properly amended.

From an accounting perspective, an increase in equity resulting from owners' contributions is not income. Therefore, a properly documented capital contribution by a participant differs in nature from non-repayable assistance provided by a third party.

Special Risk for LLCs Paying the Single Tax

Legal entities paying the single tax should use this mechanism with particular caution.

Subparagraph 8 of Paragraph 292.11 of the Tax Code expressly excludes from income funds and property contributed by founders or participants to registered share capital. The Tax Code does not contain a separate equivalent provision for the new additional capital mechanism that does not involve changing registered share capital.

The STS explains that funds contributed by a participant to additional capital without increasing registered share capital or receiving corporate rights in exchange may be treated as non-repayable financial assistance and included in the single-tax base.

Therefore, before making a substantial contribution to additional capital, an LLC paying the single tax should consider obtaining an individual tax consultation or choosing a financing structure whose tax treatment is expressly defined by the Tax Code.

Increasing an LLC's Registered Share Capital

If the owner intends to leave the money in the company for an extended period, increasing registered share capital remains one of the most clearly regulated options.

Increasing registered share capital through additional contributions is possible only after participants have fully paid their previous contributions. A resolution of the general meeting determines the total increase, the planned amount of registered share capital, and other parameters. After the additional contributions are made, the general meeting approves the actual results, ownership interests, and increased registered share capital.

The procedure is more complicated than an ordinary loan. Therefore, if funds are needed to pay taxes today or tomorrow, repayable financial assistance is generally the faster option.

For single-tax payers, the advantage of registered share capital is that the Tax Code expressly excludes contributions by founders and participants to registered share capital from taxable income.

What Is Non-Repayable Financial Assistance?

Non-repayable financial assistance includes, in particular, funds transferred to a taxpayer under a gift agreement, another similar agreement, or without such an agreement in the circumstances covered by the definition in Subparagraph 14.1.257 of the Tax Code of Ukraine.

The main difference from repayable assistance is the absence of an obligation to return the money.

For a company under the general taxation system, the amount received is generally recognized as accounting income unless it constitutes a properly documented owner's capital contribution. Corporate income tax is calculated based on the accounting financial result, taking into account the adjustments prescribed by the Tax Code. The general principle of the Ukrainian National Accounting Standards is that an increase in assets that increases equity constitutes income, except where equity increases through owners' contributions.

For a legal entity paying the single tax, non-repayable funds received are included in income unless they qualify for a specific exclusion under the Tax Code.

The transfer of non-repayable financial assistance in monetary form does not constitute a supply of goods or services and does not create a VAT liability merely because money has been received.

Can a Company Receive Money as an Advance Payment from Another Company?

Yes, but only if there is a genuine business transaction: the company must actually be obligated to deliver goods, perform work, or provide services to the customer.

An advance payment is not a universal financing method. Once it has been received, the company incurs a contractual obligation to complete the supply or, where appropriate grounds exist, refund the money.

For a VAT payer, receiving an advance payment for a future supply is generally the first event giving rise to a VAT liability if the advance payment precedes the supply.

For a legal entity paying the single tax, monetary income is determined on a cash basis. Therefore, an advance payment received from a customer is included in income in accordance with Article 292 of the Tax Code of Ukraine.

ECR/PECR Requirements for Customer Advance Payments

If a customer independently transfers an advance payment from their current bank account to the seller's current bank account using IBAN details, this banking transaction does not require an ECR/PECR. The STS separately confirms that receiving an advance payment using the current account's IBAN details, without releasing the goods, does not require fiscalization.

If payment is made in cash, by payment card, or through another method that constitutes a settlement transaction under Law No. 265, the requirement to use an ECR/PECR is determined by the rules governing payments for goods and services.

Why You Must Not Use Fictitious Services to Transfer Money into a Company

A service agreement should be used only when the services are actually provided.

Tax accounting must be based on primary documents and information connected with actual taxable transactions. The Law on Accounting also establishes that primary documents are the basis for recording business transactions.

Therefore, a scheme in which a company receives money under a service agreement despite having no genuine intention or ability to provide those services creates unnecessary tax and contractual risks. If an owner is simply financing their own business, legislation already provides transparent mechanisms: a loan or a contribution to registered share capital or additional capital.

Accounting for Funds Received

For accounting purposes, what matters is not merely the receipt of money but its legal basis.

Repayable assistance simultaneously creates cash and a liability to the lender. Non-repayable funds may constitute income. A properly documented owner's capital contribution increases equity rather than income. A customer's advance payment remains a liability to the customer until the conditions for recognizing revenue are met; Ukrainian National Accounting Standard 15 expressly provides that advance payments for goods, works, and services are not, in themselves, recognized as accounting income.

All transactions must be supported by primary documents. For a loan, these are primarily the agreement and bank statement or properly prepared cash documents; for a capital contribution — a corporate resolution and a document confirming the transfer of money or property; for an advance payment — a commercial agreement, invoice, and payment documents.

Accounting for Contributed Funds, Bank Accounts, and Expenses in Torgsoft

Torgsoft provides a «Financial Document» mode for monitoring cash flow. It allows businesses to record receipts and expenditures through cash registers and bank accounts, filter transactions by period, business partner, cash register, company, and financial analysis category, and monitor balances. This helps distinguish financing provided to the business by its owner from sales revenue and prevents different sources of incoming funds from being mixed together.

For management accounting, Torgsoft uses financial analysis categories linked to financial transactions. A company can create separate categories such as «Repayable Financial Assistance from Owner», «Participant's Capital Contribution», «Rent», «Taxes», or other categories as needed. The software allows these categories to be created and edited to distinguish different types of expenses and receipts.

If the bank statement processing feature is used, Torgsoft also allows businesses to retrieve account transactions and link bank movements with internal financial accounting. However, financial accounting within the software does not replace accounting entries, agreements, participants' resolutions, or tax reporting: each receipt of funds must have a legal basis supported by separate documents.

Which Option Should the Owner Choose?

For an urgent short-term need for funds, the procedure may be as follows:

1. If the money must be repaid to the owner — conclude a written interest-free loan agreement that meets the definition of repayable financial assistance.

2. Check the articles of association and whether corporate approval of the transaction is required.

3. For a legal entity paying the single tax, establish internal monitoring of the 12-month repayment deadline for each installment.

4. Transfer the funds to the company's current bank account with a clear payment reference.

5. Record the receipt as a liability rather than sales revenue.

6. When repaying an individual, properly report the payment in tax returns.

7. If repayment is not intended — consider a capital contribution and, for an LLC paying the single tax, separately assess the difference between registered share capital and additional capital.

For a substantial amount that the owner intends to leave in the company permanently, equity financing is generally more appropriate. For an LLC under the general taxation system, one option is additional capital as provided by Article 12 of the Law on LLCs. For an LLC paying the single tax, contributions specifically to registered share capital have more predictable tax treatment because their exclusion from income is expressly established by the Tax Code of Ukraine.

Official Sources

• Tax Code of Ukraine dated December 2, 2010, No. 2755-VI — Subparagraph 14.1.257 (repayable and non-repayable financial assistance), Subparagraph 165.1.31, Articles 185, 187, 291–292, including Subparagraphs 3 and 8 of Paragraph 292.11. Tax Code of Ukraine No. 2755-VI

• Civil Code of Ukraine dated January 16, 2003, No. 435-IV — Articles 1046–1049: loan agreements, written form, interest, and loan repayment. Civil Code of Ukraine No. 435-IV

• Law of Ukraine «On Limited and Additional Liability Companies» dated February 6, 2018, No. 2275-VIII — Articles 12, 13, 16, 18, and 44: additional capital, registered share capital, additional contributions, and significant transactions. Law No. 2275-VIII on Limited and Additional Liability Companies

• Law of Ukraine «On Amendments to Article 12 of the Law of Ukraine “On Limited and Additional Liability Companies” Regarding the Regulation of Certain Issues Related to the Establishment of Additional Company Capital» dated July 31, 2025, No. 4564-IX. Law No. 4564-IX on Additional Capital of LLCs

• Law of Ukraine «On Accounting and Financial Reporting in Ukraine» dated July 16, 1999, No. 996-XIV — Article 9 concerning primary documents. Law No. 996-XIV on Accounting

• Ukrainian National Accounting Standard 1 «General Requirements for Financial Reporting», approved by Ministry of Finance Order No. 73 dated February 7, 2013 — definitions of income, liabilities, and equity. Ukrainian National Accounting Standard 1

• Ukrainian National Accounting Standard 15 «Revenue», approved by Ministry of Finance Order No. 290 dated November 29, 1999 — rules for recognizing revenue and advance payments. Ukrainian National Accounting Standard 15 «Revenue»

• Regulation on Cash Transactions in the National Currency of Ukraine, approved by Resolution of the Board of the National Bank of Ukraine No. 148 dated December 29, 2017 — provisions concerning cash documentation and cash settlement limits. NBU Resolution No. 148

• Law of Ukraine «On the Use of Registrars of Settlement Operations in Trade, Catering, and Services» dated July 6, 1995, No. 265/95-VR — Articles 2, 3, and 9 concerning settlement transactions and cases where ECRs/PECRs are not required. Law No. 265/95-VR on ECRs/PECRs

• STS Clarification Regarding Participants' Contributions to the Additional Capital of a Legal Entity Paying Group III Single Tax: the STS identifies the risk that a contribution made without changing registered share capital may be classified as non-repayable financial assistance.

• STS Public Information and Reference Resource — current clarification on reporting the principal amount of repayable financial assistance in Annex 4DF: income code «153» when repaid to an individual and «197» when provided to an individual.