Public organizations attention!

Regarding registration of public organizations as a VAT payer and exemption from the VAT of provision of charitable aid (in the form of food products) to affected territorial communities for free transfer to recipients of charitable aid (citizens).

Law of Ukraine "On charitable activities and charitable organizations" (hereinafter – Law № 5073) stipulates that beneficiary is a recipient of charitable aid (particularly, territorial community) that receives aid from one or more benefactors to achieve goals determined by the Law № 5073.

Purposes of charitable activities are to provide aid to promote legitimate interests of beneficiaries in areas of charitable activity defined by the Law № 5073, as well as development and support of these areas in the public interest (Part 1 Article 3 of the Law № 5073).

Subjects of charitable activities are charitable organizations established and operate according to the Law № 5073, as well as other benefactors and beneficiaries (Part 1 Article 4 of the Law № 5073).

Article 6 of the Law № 5073 provides for the possibility of benefactor transferring funds, other property, property rights to the ownership of beneficiaries free of charge in order to achieve certain predetermined goals of charitable activity, according to the Law № 5073.

On the behalf of and in interests of territorial community, local self-government bodies authorized by them commit acts (Part 1 Articles 169, 172, 173, 327 of the Civil Code of Ukraine, Article 60 of the Law of Ukraine "On local self-government in Ukraine").

Therefore, if activity of local self-government body is carried out in areas specified in Article 3 of the Law № 5073 with observance of all obligatory conditions stipulated by special legislation, local self-government bodies may receive charitable (including humanitarian) aid for transfer to recipients of charitable aid.

Relations that arise in the tax administration sphere are governed by norms of the Tax Code of Ukraine (hereinafter – Code) (Paragraph 1.1 Article 1 of the Code).

Articles 181 and 182 of the Code define conditions for registration of individual as the VAT payer, according to which registration of such individual as the VAT payer can be carried out both in obligatory manner and by individual's voluntary decision.

In case that the total amount from the supply of products/services subject to taxation according to this Section, including supply of products/services using local or global computer network (in particular, but not exclusively by installing special application or application on smartphones, tablets or other digital devices), charged (paid) to such individual during the last 12 calendar months, collectively exceeds 1000000 UAH (excluding value added tax), such individual is obliged to register as a taxpayer in the controlling body at location (residence place) in compliance with requirements provided for in Article 183 of this Code, except for individual who is the single tax payer of Groups I – III (Paragraph 181.1 Article 181 of the Code).

For registration purposes as the VAT payer, the total volume of supply of products/services includes operations taxed at any VAT rate (20%, 0%, 7%, 14%) and exempted from the VAT.

At the same time, operations provided for in Sub-paragraph 197.1.15 Paragraph 197.1 Article 197 of the Code, carried out during the martial law in Ukraine, introduced by Decree of the President of Ukraine "On the introduction of martial law in Ukraine" № 64/2022 as of 24.02.2022, approved by the Law of Ukraine "On the approval of Decree of the President of Ukraine "On the introduction of martial law in of Ukraine" № 2102-IX as of 24.02.2022, by public associations and/or charitable organizations are not included by such public associations or charitable organizations in the process of determining the total amount for obligatory registration by the value added tax payer according to Article 181 of the Code (Sub-paragraph 69.12 Paragraph 69 Sub-section 10 Section XX of the Code).

In view of above specified, public organizations formed and registered according to legislation is not subject to obligatory registration as the VAT payer, if supply volumes of products/services according to Sub-paragraph 197.1.15 Paragraph 197.1 Article 197 of the Code exceed 1 million UAH.

Sub-paragraph 197.1.15 Paragraph 197.1 Article 197 of the Code stipulates that there are exempted from the VAT operations of providing charitable aid, in particular free supply of products/services to charitable organizations established and registered according to the Law, as well as provision of such aid by charitable organizations to recipients (subjects) of charitable aid according to legislation on charitable activities and charitable organizations.

Free supply should be understood as supply of products/services to charitable organizations and recipients of charitable aid without any monetary, material or other types of compensation. In case of non-compliance with conditions specified in Sub-paragraph 197.1.15 Paragraph 197.1 Article 197 of the Code, such operations are taxed on a general basis.