ENTRY
According to the Law of Ukraine "On Charitable Activities and Charitable Organizations" No. 5073 dated 05.07.2012, a philanthropist is a capable individual or a legal entity of private law (including a charitable organization) that voluntarily carries out one or more types of charitable activities.
For our Foundation, benefactors are the people thanks to whom we are able to close fundraisers and help the Armed Forces and the Territorial Defense. Without you, dozens of generators and hundreds of sets of tactical clothing would not have been purchased. Thank you to everyone who donates to the Armed Forces of Ukraine. Together we are strong!
But not everyone probably knows that they can use the benefits for charitable assistance, which are provided for philanthropists in the legislation of Ukraine.
P.S. Each of the documents mentioned below, which are necessary in order to take advantage of the benefits, can be obtained in our Charitable Foundation.
CATEGORIES OF BENEFACTORS
Our experts have prepared an article that describes in detail how and which categories of philanthropists are or are not eligible to receive tax benefits and which ones. All information provided is relevant at the time of publication (01.09.2023) and until subsequent changes in the legislation of Ukraine.
Thus, according to the current legislation, benefactors can be:
- Individual (individual);
- Sole proprietorship (individual entrepreneur);
- Legal entity (legal entity);
- VAT payers.
BENEFITS FOR INDIVIDUAL BENEFACTORS
An individual is entitled to a tax deduction.
If an individual has transferred funds or property in the form of donations or charitable contributions to non-profit organizations included in the Register of Non-Profit Organizations and Institutions (the register is published on the website of the State Tax Service) and has fulfilled certain legal conditions, then for 2022 he can receive a tax discount in the amount of 16% of the total taxable income for the year.
Previously, this discount was 4%, but after the introduction of martial law, the tax discount is 16%.
To receive a tax discount based on the results of 2022, you must submit a tax return by 31.12.2023. Copies of supporting documents must be attached to the declaration (in particular, receipts identifying the recipient and the person applying for a tax discount, as well as copies of contracts (donation agreement), if any, a letter of appeal).
CONCLUSIONS FOR INDIVIDUAL BENEFACTORS:
- The right to a tax discount for charity is granted to an individual who is an employee and exclusively to income received during the year in the form of wages;
- In 2023, you can file a tax return for 2022 and receive the amount of the tax deduction, which will be transferred to your bank details;
- Transfers for other years cannot be included in the current declaration;
- The tax discount is not provided to the military, who receive not a salary, but a monetary support;
- If in 2023. The benefactor does not use his right to accrue a tax discount for 2022, then such a right is not carried over to the next tax years.
Conclusions are made on the basis of para. 166.3.2, para. 133.4, section XX. Subsection 1. Clause 21 of the Tax Code of Ukraine.
EXAMPLE NO. 1 OF CALCULATING A TAX DISCOUNT FOR INDIVIDUAL ENTREPRENEURS:
CONDITIONS:
Salary for 2022 (total for the year) – UAH 130,000.00.
Withheld amount of personal income tax 18% – UAH 23,400.00.
Charitable contribution in 2022 – UAH 25,000.00.
Limit 16% = (130,000.00*16%) = UAH 20,800.00.
Since the limit of 16% is less than the transferred charitable contribution, the calculation will be as follows:
CALCULATION:
(130,000.00 – 20,800.00)*18% = UAH 19,656.00
23,400.00 – 19,656 = UAH 3,744.00
The tax discount is UAH 3,744.00.
EXAMPLE NO. 2 OF CALCULATING THE TAX DISCOUNT FOR INDIVIDUAL ENTREPRENEURS:
CONDITIONS:
Salary for 2022 (total for the year) – UAH 130,000.00.
Withheld amount of personal income tax 18% – UAH 23,400.00.
Charitable contribution in 2022 – UAH 20,000.00.
Limit 16% = (130,000.00*16%) = UAH 20,800.00.
Since the limit of 16% is more than the transferred charitable contribution, the calculation will be as follows:
CALCULATION:
(130,000.00 – 20,000.00)*18% = UAH 19,800.00
23,400.00 – 19,800 = UAH 3,600.00
The tax discount is UAH 3,600.00.
BENEFITS FOR SOLE PROPRIETORS
An individual entrepreneur cannot receive a charity benefit.
A sole proprietorship, a single tax payer of the first – third groups, cannot have benefits when providing charitable assistance, since the procedure for determining income is not affected by the amount of any expenses. Therefore, the provision of charitable assistance does not affect the amount of tax.
A sole proprietor under the general taxation system calculates his income as the difference between revenue and documented expenses. However, the expenses related to the receipt of income do not include the costs of charity. Therefore , a sole proprietor under the general taxation system is also not entitled to tax benefits related to charitable assistance.
Conclusions are made on the basis of Art. 292 and Art. 177.4 of the Tax Code of Ukraine.
BENEFITS FOR LEGAL ENTITIES AND BENEFACTORS
ENTRY
Taxation for legal entities is complex and it is necessary to take into account its specifics when calculating benefits. Benefits are affected by the category of legal entities. For example, there are large taxpayers, medium-sized businesses, small businesses, single tax payers, and the general taxation system. The system of benefits also differs if a legal entity provides charitable assistance to a charitable foundation or not to a charitable foundation. In this article, we will try to understand the features of each category.
CATEGORIES OF LEGAL ENTITIES:
- A legal entity that is a single tax payer;
- A legal entity under the general taxation system:
- A legal entity that provides charitable assistance to a charitable foundation:
- A legal entity that does not adjust the financial result before tax for all differences;
- A legal entity that adjusts the financial result before tax for all differences;
- A legal entity that provides charitable assistance not to a charitable foundation.
- A legal entity that provides charitable assistance to a charitable foundation:
LEGAL ENTITY SINGLE TAX PAYER
A legal entity that is a single tax payer cannot have benefits when providing charitable assistance, since the procedure for determining income is not affected by the amount of any expenses. Therefore, the provision of charitable assistance does not affect the amount of the single tax.
The conclusions were made in accordance with Art. 292 of the Tax Code of Ukraine.
PROVIDING CHARITABLE ASSISTANCE TO A CHARITABLE FOUNDATION
A LEGAL ENTITY ON THE GENERAL TAXATION SYSTEM THAT DOES NOT ADJUST THE FINANCIAL RESULT
Legal entities on the general taxation system, whose annual income from any activity, determined according to the accounting rules for the last annual reporting period, does not exceed forty million hryvnias, the object of taxation can be determined without adjusting the financial result before tax for all differences. In the accounting of the philanthropic enterprise, the amount of "monetary" assistance and the cost of donations in the form of goods and materials on the basis of para. 6 of Accounting Regulations 16 "Expenses" fall directly into accounting expenses and in this case Article 140.5.9 of the Tax Code does not apply.
CONCLUSION: a legal entity that does not apply the adjustment of the financial result to taxation for all differences, reflects the full amount of charitable assistance (cash and in the form of goods and materials) in expenses and thus reduces the tax base, i.e . has the right to a benefit.
The conclusions were made on the basis of para. 6 of Accounting Regulations 16 "Expenses", Art. 134.1.1 and Art. 140.5.9 of the Tax Code of Ukraine.
A LEGAL ENTITY ON THE GENERAL TAXATION SYSTEM THAT ADJUSTS THE FINANCIAL RESULT
A legal entity on the general taxation system, which applies the adjustment of the financial result and provides charitable assistance to non-profit organizations included in the Register of Non-Profit Institutions and Organizations, is entitled to a benefit, since charitable assistance (monetary and the cost of donations in the form of goods and materials) is the company’s expenses according to accounting. But there is a limit of 4% of the taxable profit of the previous reporting year.
CONCLUSION: A legal entity under the general taxation system, which adjusts the financial result before tax for all differences, must adjust its profit if charitable assistance exceeds 4 percent of the taxable profit of the previous reporting year.
Conclusions were made in accordance with para. 140.5.9 and Art. 134.1.1 of the Tax Code of Ukraine, para. 6 of Accounting Regulations 16 "Expenses".
PROVIDING CHARITABLE ASSISTANCE NOT TO A CHARITABLE FOUNDATION
A legal entity on the general taxation system that provides charitable assistance NOT to a charitable foundation, but directly to recipients established by Subsection XX, para. 69.6 (for example, the Armed Forces of Ukraine, the National Guard of Ukraine, the Security Service of Ukraine, the Foreign Intelligence Service of Ukraine, etc.) in the form of personal protective equipment, technical means of surveillance, medicines, medical devices and other goods, the list of which is determined by the Cabinet of Ministers of Ukraine, does not adjust the financial result and reflects the entire amount of charitable assistance in expenses and thus reduces the tax base . This provision of the law is valid for the period until the termination or abolition of martial law. From 01.08.2023, it is not limited to the list to be determined by the Cabinet of Ministers of Ukraine for the non-application of the adjustment difference in accordance with subparagraph 140.5.9 of paragraph 140.5 of Article 140 of the Tax Code of Ukraine.
The conclusions were made in accordance with subsection XX, para. 69.6 of the Tax Code of Ukraine.
BENEFITS FOR VAT PAYERS
VAT payers can be:
- Sole proprietorship in the 3rd group of the single tax;
- a legal entity in the 3rd group of the single tax;
- a legal entity on the general taxation system;
- Sole proprietorship on the general taxation system.
PROVIDING CHARITABLE ASSISTANCE TO A CHARITABLE FOUNDATION
VAT payers who provide charitable assistance to charitable organizations are exempt from VAT, but at the same time there are contingent VAT liabilities under para. 198.5 of the TCU, if during such purchase or production the tax amounts were included in the tax credit.
CONCLUSION: Free supplies to charitable organizations are exempt from taxation, but a conditional sale should be accrued on goods (services) for which the tax credit was reflected.
The conclusions were made in accordance with Art. 197.1.15 and 198.5 of the Tax Code of Ukraine.
PROVIDING CHARITABLE ASSISTANCE NOT TO A CHARITABLE FOUNDATION
According to the norm, which is in force temporarily during the legal regime of martial law, transactions for the free transfer/provision of goods and services to the Armed Forces of Ukraine, the National Guard of Ukraine, the Security Service of Ukraine, etc., are not considered to be the supply of goods and services. This does not apply in cases where such transactions for the supply of goods and services are taxed at a zero rate of value added tax.
CONCLUSION: If the taxpayer for the period until the termination or abolition of martial law on the territory of Ukraine transfers goods (services) free of charge to organizations in accordance with para. 32-1 of sub-sec. 2 chap. XX of the TCU, it is not a supply and has no tax liabilities for VAT. There is no need to accrue a conditional sale.
Conclusions are made in accordance with Section XX, sub-sec. 2, para. 32-1 of the Tax Code of Ukraine.
