The business requests changes to the taxation of charitable assistance

15/ 05/ 2023

Several weeks ago, the Committee of the Verkhovna Rada of Ukraine on Finance, Taxation, and Customs Policy supported draft law No. 9177 on amendments to the Tax Code of Ukraine regarding providing charitable assistance to nonprofit organizations. It is worth noting that with the onset of Russias full-scale invasion of Ukraine, Ukrainian businesses have mobilized their financial and labor efforts to support the defense forces by making direct purchases and financing the acquisition of necessary goods, works, and services, among other things. However, according to legislation, charitable assistance provided by companies has remained subject to taxation. Draft law No. 9177 proposes to exempt companies charitable assistance to the country from taxation (if it does not exceed 10% of the taxable profit of the previous reporting year). However, considering the last unprofitable year for most companies, the provision for increasing the profit percentage may not be relevant for all companies. Therefore, businesses are requesting to consider the possibility of an additional criterion for tax exemption on charitable assistance, such as 2% of net income, which companies can spend on supporting the Armed Forces of Ukraine without the need for taxation. The European Business Association requests the Verkhovna Rada of Ukraine to adopt the draft law in the first reading but amend it between the first and second readings. The aim is to improve the provisions of the Tax Code, taking into account the circumstances of wartime and the specificities of providing charitable assistance to our military rather than exacerbating legislative contradictions. The business community separately requests the Cabinet of Ministers of Ukraine to establish a list of goods that can be provided to the Armed Forces of Ukraine free of charge. Currently, the Tax Code provides a highly restricted list of goods, including body armor, helmets, etc. However, for over a year, the Tax Code has stipulated that the comprehensive list should be approved by the Cabinet of Ministers, which, unfortunately, has not been done yet. As a result, companies, when providing items such as communication devices (phones, tablets, radios, etc.), vehicles, and so on, free of charge, are still required to pay additional taxes, which is considered unfair. We sincerely hope that the voice of the business will be heard because, for over a year now, companies have been supporting the country and the Armed Forces. And the government must respond to these crucial and fair initiatives.

It is worth noting that with the onset of Russia’s full-scale invasion of Ukraine, Ukrainian businesses have mobilized their financial and labor efforts to support the defense forces by making direct purchases and financing the acquisition of necessary goods, works, and services, among other things. However, according to legislation, charitable assistance provided by companies has remained subject to taxation. Draft law No. 9177 proposes to exempt companies’ charitable assistance to the country from taxation (if it does not exceed 10% of the taxable profit of the previous reporting year). However, considering the last unprofitable year for most companies, the provision for increasing the profit percentage may not be relevant for all companies.

Therefore, businesses are requesting to consider the possibility of an additional criterion for tax exemption on charitable assistance, such as 2% of net income, which companies can spend on supporting the Armed Forces of Ukraine without the need for taxation.

The European Business Association requests the Verkhovna Rada of Ukraine to adopt the draft law in the first reading but amend it between the first and second readings. The aim is to improve the provisions of the Tax Code, taking into account the circumstances of wartime and the specificities of providing charitable assistance to our military rather than exacerbating legislative contradictions.

The business community separately requests the Cabinet of Ministers of Ukraine to establish a list of goods that can be provided to the Armed Forces of Ukraine free of charge. Currently, the Tax Code provides a highly restricted list of goods, including body armor, helmets, etc. However, for over a year, the Tax Code has stipulated that the comprehensive list should be approved by the Cabinet of Ministers, which, unfortunately, has not been done yet. As a result, companies, when providing items such as communication devices (phones, tablets, radios, etc.), vehicles, and so on, free of charge, are still required to pay additional taxes, which is considered unfair.

We sincerely hope that the voice of the business will be heard because, for over a year now, companies have been supporting the country and the Armed Forces. And the government must respond to these crucial and fair initiatives.