Regarding procedure of the personal income tax and military levy taxation of income in the form of charitable assistance paid to internally displaced persons by international charitable organizations
Legal foundations of charitable activities in Ukraine, including creation, formation and implementation of the activities of charitable organizations, are defined in the Law of Ukraine № 5073-VI as of 05.07.2012 "On charitable activities and charitable organizations" (hereinafter – Law № 5073).
Paragraph 2 of Part 1 of Article 1 of the Law 5073 stipulates that charitable activity is voluntary personal and/or property assistance to achieve goals defined by the Law № 5073, which does not involve the benefactor receiving a profit, as well as payment of any remuneration or compensation to the benefactor on behalf of or on behalf of the beneficiary.
At the same time, a philanthropist is able-bodied person or legal entity under the private law (including charitable organization), who voluntarily carries out one or more types of charitable activities (Paragraph 5 of Part 1 of Article 1 of the Law № 5073).
Part 1 of Article 1 of the Law of Ukraine № 1706-VII as of 20.10.2014 "On ensuring rights and freedoms of internally displaced persons" (hereinafter – Law №1706) stipulates that internally displaced person is a citizen of Ukraine, foreigner or stateless person who is in the territory of Ukraine on legal grounds and has right to permanent residence in Ukraine, who was forced to leave or leave residence place as a result of or in order to avoid negative consequences of armed conflict, temporary occupation, widespread manifestations of violence, violations of human rights and emergency situations of natural or man-made nature.
Procedure for income taxation of individuals is regulated by Section IV of the Code, according to Sub-paragraph 163.1.1 Paragraph 163.1 Article 163, of which taxation object of resident is the total monthly (annual) taxable income.
List of incomes that are not included in the total monthly (annual) taxable income is determined by Article 165 of the Code.
In addition, incomes that, according to Section IV of the Code and Sub-section 1 of Section XX "Transitional Provisions" of the Code, are not included in the total taxable income of individuals (are not subject to taxation, taxed at a zero rate), are exempted from taxation, except for income specified in Sub-paragraphs 3 and 4 of Paragraph 170.131 Article 170 of the Code and Paragraph 14 of Sub-section 1 of Section XX "Transitional Provisions" of the Code (Sub-paragraph 1.7 of Paragraph 16¹ Sub-section 10 Section XX "Transitional Provisions" of the Code).
Situation 1. Taxation of charitable assistance provided by benefactors – residents
Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code stipulates that the total monthly (annual) taxable income of the taxpayer does not include amount (value) of charity aid paid (provided) by the benefactors, including benefactors – persons who are entered in Register of volunteers of the anti-terrorist operations and/or implementation of measures to ensure national security and defense, repulse and deterrence of armed aggression of Russian Federation, in manner specified by the Law № 5073 or in manner specified by the Law № 5073, for benefit of:
persons who live (have lived) in territory of settlements where the anti-terrorist operation is being carried out (was carried out) and/or have been forced to leave their residence place in connection with the anti-terrorist operation in such settlements (Clause 4 of Sub-paragraph “a” Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code).
persons who lived in territory of the Autonomous Republic of Crimea and were forced to leave their residence place in connection with temporary occupation of territory of Ukraine, defined by the Law of Ukraine "On ensuring rights and freedoms of citizens and legal regime in temporarily occupied territory of Ukraine" (Clause 5 of Sub-paragraph “a” Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code).
persons who live (lived) in territory of settlements in which hostilities are (were) taking place, and/or who were forced to leave their residence place in connection with hostilities in such settlements (Clause 4 of Sub-paragraph “b” Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code).
Taxation procedure of charitable assistance is regulated by Paragraph 170.7 Article 170 of the Code, according to Sub-paragraph "b" of Sub-paragraph 170.7.2 Paragraph 170.7 Article 170 of the Code, targeted or non-targeted charitable assistance provided to the taxpayer who suffered as a result of armed aggression of Russian Federation during period of legal regime of the martial law and state of emergency is not included in the taxable income.
Charitable assistance provided for the specified purposes must be distributed through the state or local budget or through the bank accounts of charitable organizations, the Red Cross Society of Ukraine, entered in Register of non-profit organizations and institutions.
Procedure for confirming status of persons who suffered as a result of armed aggression of Russian Federation against Ukraine during legal regime of the martial law, state of emergency, with aim of not including income received in the form of targeted or non-targeted charitable assistance in taxable income of persons – taxpayers, is determined by the Cabinet of Ministers of Ukraine.
Temporarily, starting from date of introduction of the martial law in Ukraine until its termination or cancellation of provisions of Sub-paragraph "b" of Sub-paragraph 170.7.2 Paragraph 170.7 Article 170 of the Code are applied taking into account the following peculiarities: before adoption by the Cabinet of Ministers of Ukraine of procedure for confirming status of persons who suffered as a result of armed aggression of Russian Federation against Ukraine during period of legal regime of the martial law, state of emergency, with aim of not including in the taxable income of persons – taxpayers incomes received in the form of targeted or non-targeted charitable assistance, status of such persons is determined independently by the providers of targeted or non-targeted charitable assistance (Paragraph 26 of Sub-section 1 Section XX "Transitional Provisions" of the Code).
In addition, Sub-paragraph 170.7.8 Paragraph 170.7 Article 170 of the Code, it is determined that charitable assistance provided according to Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code:
- a) in any amount (value) provided, in particular:
taxpayers specified in Clauses 3 – 5 of Sub-paragraph "a", Clauses 3and 4 of Sub-paragraph "b" of Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code, as assistance for treatment and medical care (examination, diagnosis), including for payment (compensation) of the cost of medicines, donor components, medical devices, technical and other rehabilitation means, paid treatment services, provision of medical products appointment, technical and other rehabilitation means, medical rehabilitation services, sanatorium-resort rehabilitation;
- b) in amount that, in aggregate, during the reporting (tax) year does not exceed 500 times the minimum wage established by the law on January 1 of the reporting (tax) year – for restoration of lost property, for housing, social and household needs and for other needs according to the list determined by the Cabinet of Ministers of Ukraine, which arose from taxpayers, defined in Sub-paragraph 165.1.54 Paragraph 1 Article 165 of the Code. If the total amount of charitable assistance received during the reporting (tax) year exceeds the specified maximum amount, amount exceeding this amount is taxed at rate established by Paragraph 167.1 Article 167 of the Code, and the taxpayer is obliged to submit annual tax declaration indicating amount of charitable assistance.
At the same time, Resolution № 653 of the Cabinet of Ministers of Ukraine as of 26.11.2014 approved list of needs, amount of charitable assistance for satisfaction of which is not included in the taxable income of individuals' income tax payers.
Temporarily, starting from date of introduction of the martial law in Ukraine until its termination or cancellation of provision of Clause 4 of Sub-paragraph "b" of Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code are applied taking into account the following peculiarities: to determine status of persons – taxpayers who receive charitable assistance paid (provided) by the benefactors, in order established by the Cabinet of Ministers of Ukraine , including by the benefactors – persons, in manner determined by the Law № 5073, is determined independently by the providers of charitable assistance (Paragraph 25 of Sub-section 1 Section XX "Transitional provisions" of the Code).
Herewith, Resolution № 1364 of the Cabinet of Ministers of Ukraine as of 06.12.2022 "Some issues of forming list of territories on which hostilities are (were) conducted or temporarily occupied by the Russian Federation" determined that the list of territories on which hostilities were (were) conducted or temporarily occupied by the Russian Federation, is approved by the Ministry for Reintegration of Temporarily Occupied Territories in the form according to the annex by agreement with the Ministry of Defense on the basis of suggestions of relevant regional and Kyiv city military administrations.
Order № 309 of the Ministry for Reintegration of Temporarily Occupied Territories of Ukraine as of 22.12.2022, with changes, confirmed List of territories in which military operations are being (were) being carried out or which are being occupied by the Russian Federation.
Taking into account above specified, if income in the form of charitable assistance is paid (provided) by the benefactors, including benefactors – persons who are entered in Register of volunteers of the anti-terrorist operations and/or implementation of measures to ensure national security and defense, repel and deter armed aggression of Russian Federation, according to procedure established by the Law № 5073, or according to procedure established by the Law № 5073, in favor of persons specified in Clauses 4 – 5 of Sub-paragraph "a", Clause 4 of Sub-paragraph "c" of Sub-paragraph 165.1.54 Paragraph 165.1 Article 165 of the Code, amount of such assistance is not included in the total monthly (annual) taxable income of the taxpayer, subject to compliance with requirements specified in Sub-paragraph 170.7.8 Paragraph 170.7 Article 170 of the Code and Paragraphs 25 and 26 of Sub-section 1 Section XX "Transitional Provisions" of the Code.
Situation 2. Taxation of charitable assistance provided by the international charitable organizations (their branches, representative offices)
Sub-paragraph 165.1.56 Paragraph 165.1 Article 165 of the Code stipulates that the total monthly (annual) taxable income of the taxpayer does not include amount (value) of charitable assistance paid (provided) by the international charitable organizations (their branches, representative offices), list of which is determined by the Cabinet of Ministers of Ukraine, in favor of:
persons who live (lived) in territory of settlements where the anti-terrorist operation is (was) being conducted (with exception of territories where state authorities temporarily do not exercise or do not exercise their powers to the full extent), and/or were forced to leave their residence place in connection with conduction of the anti-terrorist operation in such settlements and taken into account according to procedure established by the law in structural divisions for social protection of population of district, district in the Kyiv city state administrations, executive bodies of city, district in cities (in case of formation) of councils;
persons who lived in territory of the Autonomous Republic of Crimea and were forced to leave their residence place in connection with temporary occupation of territory of Ukraine, defined by the Law of Ukraine "On ensuring rights and freedoms of citizens and legal regime in temporarily occupied territory of Ukraine", and taken in the established legislation order for registration in structural subdivisions on issues of social protection of population of district, district in the Kyiv city state administrations, executive bodies of city, district in cities (in case of formation) of councils;
persons who live (have lived) in settlements on territory of which hostilities are being (were) being conducted during the martial law or state of emergency, and/or who have been forced to leave their residence place (temporarily displaced persons) due to the force majeure circumstances, including in connection with introduction of the martial law, state of emergency, confirmed according to procedure established by the law.
Resolution № 397 of the Cabinet of Ministers of Ukraine as of 22.04.2015 "Some issues of activities of the international charitable organizations, their branches and representative offices", as amended, established that the international charitable organizations, their branches and representative offices, which provide charitable assistance to individuals listed in Sub-paragraph 165.1.56 Paragraph 165.1 Article 165 of the Code, are noted in the Unified register of recipients of humanitarian aid.
Ministry of Social Policy of Ukraine maintains the Unified register of humanitarian aid recipients according to Regulation on the Ministry of Social Policy of Ukraine, approved by Resolution № 423 of the Cabinet of Ministers of Ukraine as of 17.06.2015, as amended.
The Unified register of recipients of humanitarian aid is publicly available on the official web portal of the Ministry of Social Policy of Ukraine (https://www.msp.gov.ua) at the link: Main/Regulatory base/Regulatory acts/Humanitarian aid/Others/Unified register of recipients of humanitarian aid.
Taking into account above specified, if income in the form of charitable assistance is paid (provided) by the international charitable organizations (their branches, representative offices), list of which is determined by the Cabinet of Ministers of Ukraine, for benefit of individuals specified in Sub-paragraph 165.1.56 Paragraph 165.1 Article 165 of the Code, amount of such assistance is not included in the total monthly (annual) taxable income of the taxpayer.
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