To the attention non-profit institutions and organizations!

State Tax Service of Ukraine informs that the Ministry of Finance of Ukraine has provided explanation regarding reflection by non-profit organizations in accounting and financial reporting of operations for receiving grants in foreign currency and accrual of income from exchange rate differences for such operations (letter of the Ministry of Finance of Ukraine № 41010-06-62/5373 as of 22.02.2024) (hereinafter – Letter of the Ministry of Finance).

Applying the letter of the Ministry of Finance, the following must be taken into account. Law of Ukraine "On humanitarian aid" stipulates that humanitarian aid is targeted addressed free aid in monetary or in-kind form, in the form of irrevocable financial aid or voluntary donations, or aid in the form of works, provision of services provided by foreign and domestic donors for humanitarian reasons recipients of humanitarian aid in Ukraine or abroad, who need help in connection with social insecurity, material insecurity, difficult financial situation, introduction of the state of war or emergency, emergence of emergency situation or serious illness of a specific individual, as well as for preparation for armed defense of the state and its protection in case of armed aggression or armed conflict.

Law of Ukraine "On charitable activities and charitable organizations" stipulates that charitable donation is recognized as free transfer by a benefactor of funds, other property, property rights to the ownership of beneficiaries to achieve certain, predetermined goals of charitable activity, according to this Law.

Charitable grant recognizes targeted assistance in the form of currency values, which must be used by the beneficiary within period determined by the benefactor. Amounts of currency values of charitable grant intended use of which did not take place within the period determined by the benefactor are subject to return to the benefactor as returnable financial assistance.

Taking into account above specified, in letter of the Ministry of Finance it was informed that accounting of targeted aid in the form of currency values is regulated by the Accounting procedure of humanitarian aid, approved by Order of the Ministry of Finance of Ukraine № 298 as of 14.12.1999 (hereinafter – Procedure), national provisions (standards) of accounting 15 "Income" and 21"Impact of changes in exchange rates", approved by Orders of the Ministry of Finance of Ukraine № 290 as of 29.11.1999 and № 193 as of 10.08.2000, respectively.

Paragraph 1.2 of the Procedure stipulates that recipient reflects received humanitarian aid in the form of cash and tangible assets as a debit to the accounting accounts of cash, products, stocks and other property in correspondence with account 48 "Targeted financing and targeted revenues".

Procedure for reflecting received targeted funding in accounting is given in Paragraphs 16-19 of the national accounting provisions (standards) 15 "Income".

In particular, targeted financing is not recognized as income until there is confirmation that it will be received and entity meets conditions for such financing.

Received targeted financing, in particular funds exempted from taxation in connection with provision of corporate income tax benefits, is recognized as income during periods in which expenses related to the fulfillment of terms of targeted financing were incurred.

Targeted financing of capital investments is recognized as income during the period of useful use of relevant investment objects (fixed assets, intangible assets, etc.) in proportion to the amount of accrued depreciation of these objects.

National provisions (standards) of accounting 21"Impact of changes in exchange rates" stipulates that monetary items are balance sheet items about cash, as well as assets and liabilities that will be received or paid in a fixed (or determinable) amount of funds or cash equivalents.

Exchange rate differences for monetary items in foreign currency are determined on the balance sheet date, as well as on the date of economic operation within its limits or for the entire item (according to the accounting policy).

Exchange rate differences from transfer of cash in foreign currency and other monetary items on operating activities are reflected in other operating income (expenses).

It should also be informed that clarification of the Ministry of Finance of Ukraine regarding accounting of charitable and humanitarian aid (Letter № 41020-06-5/8479 as of 27.04.2022) is posted on the official website of the Ministry of Finance of Ukraine in the Sub-section "Accounting/ Accounting in the business sphere" /General clarifications" of "Accounting and auditing" section of the "Activity" section.

At the same time, please note that Letter of the Ministry of Finance of Ukraine № 41010-06-62/5373 as of 22.02.2024  is posted on web portal of the State Tax Service under the heading "Legislation"/"Tax legislation"/"Letters".

At the same time, please also note letters of the ministries do not establish legal norms, they are exclusively advisory and informative in essence.