Features of cash payments by individuals and individual entrepreneurs to accounts of legal entities in Ukraine
I, Maria Elkhina, a long-standing individual entrepreneur, continue to share with you my own experience in taxation of single tax payers.
The main regulatory acts governing cash payments are:
- NBU Resolution No. 148 (as amended) – on limiting the amounts of cash payments.
- Law of Ukraine “On the Use of Cash Registers (CR)”.
- Tax Code of Ukraine – regarding the formalization and tax consequences of business transactions.
- Ministry of Finance Order No. 547 – on cash discipline.
Payment is an important element of a transaction, whether it is the purchase of goods or services. Determining the form and methods of payment is a separate business process. Their convenience and variability for customers can be a decisive factor in choosing a supplier/seller and a competitive advantage.
Technological progress provides a large number of ways to make payments between the customer and the seller. There are a number of payment systems operating in the financial services market, banks provide money transfer services and offer their own solutions aimed at simplifying the process of initiating and making payments.
The law distinguishes between two forms of payment: cash and non-cash.
Cash transactions include a much larger number of transactions than it seems at first glance. This is important for both the seller and the customer to understand.
Cash payments include transactions involving the acceptance of banknotes for payment:
Cash – banknotes and coins of the national currency of Ukraine (banknotes and coins, including small change, circulating coins, commemorative banknotes and coins that are means of payment).
Cash payments/cash settlements – cash payments by business entities and individuals for products sold (goods, work performed, services provided), as well as for transactions not directly related to the sale of products (goods, work, services) and other property.
Business entities that have opened accounts with banks and keep their funds in these accounts shall settle their monetary obligations arising in economic relations in non-cash form, as well as in cash form, subject to the restrictions and in the manner established by the legislation of Ukraine.
Business entities make cash settlements among themselves and with individuals through the cash desk using both funds received as cash proceeds and funds received from payment service providers. Such settlements are also made by depositing cash with payment service providers for further transfer of funds to the accounts of business entities.
Cash transactions are formalized by cash orders, settlement documents, electronic settlement documents, documents for transactions using payment instruments, and other cash documents that, in accordance with Ukrainian law, would confirm the fact of sale (return) of goods, provision of services, receipt (return) of cash.
Cash documents may be paper or electronic. Electronic cash documents must be drawn up in accordance with the requirements of Ukrainian legislation in the field of electronic document management.
An employee of an institution/enterprise is required to use a qualified electronic signature to sign an electronic cash document.
An individual entrepreneur has the right to use a qualified electronic signature/enhanced electronic signature to sign an electronic cash document.
An individual has the right to use a qualified electronic signature/enhanced electronic signature/simple electronic signature to sign an electronic cash document.
A business entity has the right to use a qualified electronic seal of a bank/advanced electronic seal as an additional requisite of an electronic cash document.
The use of an advanced electronic signature, advanced electronic seal, and simple electronic signature is carried out on a contractual basis using the technology specified by the business entity and in accordance with the requirements of the Laws of Ukraine “On Electronic Documents and Electronic Document Management,” “On Electronic Trust Services” and regulatory acts of the National Bank on the use of electronic signatures and electronic seals in the banking system of Ukraine.
Cash is accepted at the cash desk on the basis of a cash receipt order signed by the chief accountant or a person authorized by the head of the institution/enterprise. Documents that are the basis for their compilation may be attached to cash receipt orders.
When institutions/enterprises accept cash at the cash desk against cash receipts, a receipt (which is a detachable part of the cash receipt) is issued, signed by the chief accountant or a person authorized by the head, whose signature may be certified by the seal of this institution/enterprise. The use of a seal by an institution/enterprise is not mandatory.
Enterprises/separate divisions of enterprises/individual entrepreneurs who, in accordance with the legislation of Ukraine, accept payment instruments for servicing and make settlements using cash registers and provide payment instrument holders with cash withdrawal services with the printing of a payment terminal receipt (or settlement document), shall register such transactions in the settlement documents of the cash register or settlement document in accordance with the established procedure.
The document certifying the transfer of proceeds to the bank and confirming the receipt of cash at the cash desk of business entities is:
- a receipt to the bank’s income document for cash deposit, signed by the responsible persons of the bank and certified by the bank’s seal (if necessary);
- a receipt/check from an ATM or self-service software and hardware complex;
- accompanying cash order for the bag with valuables;
- a payment terminal receipt in the case of real-time collection of funds using payment terminals.
Cash receipts and accompanying receipts are filled out by the accountant (the responsible person of the institution/enterprise who is responsible for preparing these documents) in any way that ensures the proper preservation of these records for the period established for the storage of documents.
Cash orders shall indicate the reason for their preparation and list the documents attached to them. It is prohibited to issue cash orders to persons who deposit or receive cash.
The receipt and issuance of cash under cash orders shall be carried out only on the day of their preparation.
Corrections to cash orders are prohibited.
Before being transferred to the cash desk, cash receipts are registered by the accountant in the cash receipt register, which is kept separately for cash receipts.
The accountant (the person responsible for the institution/enterprise who is responsible for preparing these documents) has the right to register cash orders using computer tools that ensure the formation and printing of the relevant cash documents. The document “Insert sheet of the journal for registering incoming cash orders,” which is generated and printed for the relevant day, ensures the formation of data for accounting for the movement of funds.
When receiving cash orders, the cashier is obliged to check:
1) the presence and authenticity of signatures on the documents;
2) the correctness of the documents, the presence of all details;
3) the presence of the attachments listed in the documents.
The cashier returns the documents for processing if at least one of the requirements is not met.
After receiving cash orders, the cashier signs them, and the documents attached to them are stamped or marked “Paid” with the date (day, month, year).
After the cashier has compiled and processed the report, the cash documents are compiled in chronological order, numbered, formed into files in accordance with the nomenclature of files, and stored in accordance with the legislation of Ukraine by the person responsible for their storage, as assigned by the manager.
Certificates for cash documents (signed by the manager and chief accountant) are issued to state bodies/institutions at their request in cases provided for by Ukrainian law.
Cash documents may be seized in cases provided for by Ukrainian law.
Institutions/enterprises are required to have a cash register, and their managers are required to ensure that this cash register is set up and that cash is stored in it. Managers are responsible, in accordance with the procedure established by Ukrainian law, for failing to create conditions to ensure the safety of funds during their storage and transportation.
Institutions/enterprises shall record all receipts in national currency in the cash book.
Each institution/enterprise (legal entity) that has a cash register keeps one cash book to record transactions with cash in the national currency (excluding cash registers of separate divisions).
Separate divisions of institutions/enterprises that conduct transactions involving the acceptance of cash for sold products (goods, works, services) with the issuance of a cash receipt order shall keep a cash book.
Separate divisions of institutions/enterprises that carry out cash settlements using cash registers and/or cash registers and maintaining cash registers, but do not carry out transactions involving the receipt of cash under cash orders, as well as individual entrepreneurs, do not maintain cash books.
Institutions/enterprises, provided that they ensure proper storage of cash documents, have the right to keep a cash book in electronic form using computer means. The software used to maintain the cash book must provide a visual display and printout of each of the two parts of the cash book sheet (“Cash book insert” and “Cashier’s report”), which in form and content must reproduce the form and content of the cash book in paper form.
During inspections of compliance with the procedure for conducting cash transactions by institutions/enterprises, the controlling authority applies the requirements of Section VI of the Regulations on conducting cash transactions in the national currency in Ukraine.
So, to sum up: an individual, an individual entrepreneur who makes a cash payment to a legal entity (LLC) must comply with cash discipline, legal restrictions, and ensure proper documentary confirmation of each transaction.
Paragraphs 6 and 7 of Section II of NBU Resolution No. 148 state:
“Cash settlements between business entities within one day under one or several payment documents may not exceed
UAH 10,000.”
This rule applies equally
- if an individual entrepreneur pays a legal entity;
- or a legal entity pays an individual entrepreneur.
If the amount exceeds UAH 10,000, the payment must be made exclusively in non-cash form (through a bank account).
Individuals (non-entrepreneurs) have another restriction – up to UAH 50,000 in cash payments per day with enterprises or individual entrepreneurs.
The restrictions set forth in paragraphs 6 and 7 of Section II of the “Regulations on Cash Transactions in National Currency in Ukraine” do not apply to:
- settlements of business entities with budgets and state target funds;
- voluntary donations and charitable assistance;
- the use of cash issued for business trips;
- payments related to remuneration.
When an individual or individual entrepreneur makes a cash payment to a legal entity (for example, when purchasing goods or services), the following documents shall be drawn up:
1. Contract or other legal transaction (invoice, order)
- There must be a basis for payment.
- This may be a written contract, invoice, public offer, etc.
2. Cash expenditure order (CEO) – issued by the LLC
- This is the main document confirming the receipt of cash.
- Issued by the accounting department or cashier of the LLC.
Issued to the individual entrepreneur upon payment (a copy with a signature and stamp, if available, is provided).
3. Receipt for the ECO (detachable part)
- Issued together with the VKO as confirmation of the amount received.
- It can be replaced by a fiscal receipt if the LLC uses a cash register.
4. Fiscal receipt (if necessary)
- If the LLC sells goods or services through a cash register with a cash register/payment terminal, a fiscal receipt is issued. In many cases, this is a mandatory document.
5. Invoice or certificate of work performed
- To confirm the transfer of goods or provision of services.
- Must be signed by both parties.
Registration of cash transactions by legal entities (LLCs)
An LLC that accepts cash:
- Keeps a cash book.
- Issues a cash receipt order.
- Records cash on the day of receipt.
- Generates a Z-report from the cash register (if used).
Reflection in tax reporting
- Income tax
Cash itself is not income.
- Income is considered to be the sale of goods/services.
- It is determined using the accrual method (the date of transfer of goods or signing of the act of completed work).
Important: If the cash received is an advance payment, it is not included in income for tax purposes until the service is actually provided/the goods are actually transferred.
- VAT (if the LLC is a taxpayer)
VAT tax liabilities arise on the date of the first event:
- Receipt of cash (advance payment),
- Or supply of goods/services.
If the LLC has received a cash prepayment from an individual entrepreneur and is a VAT payer, it is obliged to charge VAT and register a tax invoice in the Unified Register of Tax Invoices.
Use of a cash register/payment transaction recorder (if required)
If an LLC conducts retail sales or accepts cash through a cash register, it must use a cash register or payment transaction recorder.
In this case:
- A fiscal receipt is issued.
- A Z-report is made at the end of the day.
- The RRO data is automatically included in tax reporting (through the accounting system or API).
