How are volunteer activities and charitable assistance taxed?

In order to promote the development of volunteer activities and the activities of non-profit institutions and organizations in wartime conditions, the Law of Ukraine dated August 15, 2022 No. 2520-IX (hereinafter – Law No. 2520) amended the Tax Code of Ukraine (TCU). This Law entered into force on 03.09.2022.

The main changes are as follows.

1. Exemption from taxation of funds that the volunteer collects on a personal account

Funds collected by an individual (volunteer) on his personal checking account for the payment of charitable assistance for the benefit of taxpayers specified in sub-item “c” of sub-item 165.1.54 of the Civil Code are not taxed.

These changes are applied to tax (reporting) periods starting from January 1, 2022.

2. Compensation of volunteer expenses

Documented expenses are reimbursed to the volunteer.

Expenses can be reimbursed at the expense of:

• funds from the state and local budgets — if the volunteer concluded an agreement with them on the provision of volunteer assistance;

• international programs;

• the institution, organization with which the volunteer concluded an agreement on conducting volunteer activities;

• other sources of funding not prohibited by law.

Reimbursement of expenses is not the volunteer’s income and is not the basis for single social contribution and personal income tax.

3. Reimbursement of expenses of event participants

In particular, taxable income does not include sums of funds received from charitable organizations, public associations, included in the Register of non-profit institutions and organizations, as compensation for the costs of accommodation, meals and travel to and from the venue of the events of the participants of the events such institutions.

4. Charitable assistance to war victims

Targeted or non-targeted charitable assistance provided to a tax payer affected by the war is not included in the taxable income of a natural person (clause 170.7.2 of the Code of Conduct). But for this, it is necessary to confirm the status of the victim.

5. Foreign aid to refugees

The taxable income of an individual for the 2022 and 2023 tax (reporting) years does not include income in the form of funds or goods (services) received free of charge, which the taxpayer and his family members of the first degree of kinship received at the expense of budget funds of foreign countries and their state funds Condition — such funds or goods (services) were provided to them as persons who suffered as a result of the war and exercised the right to temporary protection in accordance with the legislation of a foreign state.

6. Confirmation of the right to a tax discount

In order to confirm the expenses included in the tax discount, tax officials have no right to demand from taxpayers to provide them with documents and/or their copies, which are contained in automated information and reference systems, registers, data banks (databases) of state authorities and/or local self-government bodies . Tax officials receive information from these sources free of charge and it is contained in the information databases of the central executive body that implements state tax policy (clause 166.2.3 of the TCU).

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