Source: http://www.devisu.ua/en/accounting/6476-purchases-of-material-assets-at-the-own-expense-is-it-legally-acceptable
Timestamp: 2017-11-22 01:53:18
Document Index: 226097705

Matched Legal Cases: ['Art. 1158', 'Art.1160', 'Art. 1160', 'Art. 241', 'Art. 1000', 'Art.208', 'Art.1006']

Purchases of material assets at the own expense: is it legally acceptable?
Home > Accounting and Reporting > Purchases of material assets at the own expense: is it legally acceptable?
Tuesday, 22 November 2016 11:04	Accounting and Reporting
A director being on a business trip buys material assets at his/her own expense due to the lack of working capital. Is it legally acceptable?
If an employee being on a business trip acquires material assets at his/her own initiative, his/her actions are of a civil legal nature, namely – an affirmative action in the property interests of another person without his/her request (Art. 1158 of the Civil Code of Ukraine, hereinafter – CCU). According to sec. 1 of Art.1160 of CCU, the employee, who committed actions in the interests of a company without its order, has the right to demand compensation for the actual costs, if they were justified by circumstances under which the acts were performed. However, if the employee did not report to the head about his/her actions as soon as possible, he/she loses this right (sec. 2 of the Art. 1160 of CCU). In this case, the employee is the head, therefore, he/she has such a right. The contract of delegation is regulated by Sec. 68 “Delegation” of CCU, according to which the approval of the employee’s action means that the contract of delegation is concluded between the employee and the employer, according to which the employee has already fulfilled his/her part of the obligations, and the employer should fulfill his/her − to compensate money spent by the employee.
At the same time, the employee’s actions will be considered as approved, in particular, if the person represented by him/her (the company in the person of the head), performs an action indicating its acceptance for execution (Sec. 1 of Art. 241 of CCU).
In this situation, such an action is the approval by the head of the report of the employee on actual costs with attached supporting documents to it (letters of the Ministry of Finance of Ukraine dated 28.08.2007, № 31-34000-10-25/17266 and the Ministry of Labor of Ukraine dated 10.08.2009, № 193/06/186-09).
The experts of the Ministry of Finance of Ukraine and the National Bank also note that the issue of material assets for company at the expense of the employee and the legitimacy of their subsequent compensation are regulated by provisions of Articles 1158 and 1160 of the Civil Code (letters of the Ministry of Finance of Ukraine dated 12.10.2010, № 31-26030-12-29/27606 and dated 28.08.2007, № 31-34000-10-25/17266 and letters of the National Bank dated 01.09.2006, № 11-113/3225-9206 and dated 13.04.2005, № 11-113/1227-3746).
If an employee used personal funds in the interests of the company at the request of the employer, in fact it means the conclusion of the contract of delegation in verbal form (Art. 1000 of CCU). We recommend concluding it in written form, in spite of the norm of sec.2 of Art.208 of CCU.
It is stated in sec.2 of Art.1006 of CCU that after the request execution, the attorney is obliged to immediately submit a report on the implementation of request and supporting documents, if required by the terms of the contract and the nature of the delegation. It is not forbidden for parties in the case of a contractual relationship to agree on the other terms of report preparation on the implementation of the contract by the attorney (employee), because the terms of the report provision when using own funds are regulated by the norms of the Civil Code.
At the same time, the experts of the State Fiscal Service of Ukraine (hereinafter – SFSU) note in the sub-category 109.14 ZIR that the procedure for the issuance of cash under the report or on a business trip and dates of reporting on the use of funds provided for a business trip or a report (hereinafter – Report), approved by the Order of the Ministry of Finance of Ukraine of 28.09.2015, № 841, determined by the norms of para. 170.9 of the Tax Code of Ukraine (hereinafter – TCU) and para. 2.11 of the Regulation on cash transactions in the national currency in Ukraine, approved by the National Bank of 15.12.2004, № 637.
In the case of acquisition of goods for the needs of the company by the employee and use of funds (including his/her own) on a business trip, the Report as well as documents confirming the use of funds should be submitted within period specified by the legislation to the accounting service. The company should compensate expenses incurred by the employee for business needs of the company or on the business trip based on the Report.
The issue on the expenses compensation incurred by the employee when the acquisition of goods for the company and other issues of legality of using of the employees’ own funds to solve production (economic) issues are related to property relations between the business entity and the employee and regulated by CCU. The Ministry of Revenues of Ukraine expressed the same opinion in its letter of 03.07.2013, № 6091/6/99-99-22-02-04-15/169.
It means according to SFSU, whether advance payment for a business trip was issued on account or spending to be carried out at his/her own expense during the business trip, the company employee is obliged to submit the Report within the period established by paras. 170.9 of TCU: before the end of the 5th business day following the day when the taxpayer completes the business trip or the execution of a separate civil-law action on behalf and at the expense of the employer.