During the martial law in Ukraine, changes have been introduced to procedure for adjusting financial result before taxation of the tax (reporting) period by the amount of funds (cost of products, performed works, provided services) transferred free of charge to the non-profit organizations entered in Register of the non-profit institutions and organizations.
Changes are provided for by the Law of Ukraine № 4254-IХ as of 25.02.2025 “On amendments to the Tax Code of Ukraine regarding stimulation of charity during the martial law” (hereinafter – Law № 4254), which entered into force on 16.03.2025.
From 2025 until the end of calendar year in which martial law is terminated or cancelled, “charity limit” has been increased to 8% instead of 4% of the taxable profit of previous reporting year applying Clause 1 of Sub-paragraph 140.5.9 Paragraph 140.5 Article 140 of the Tax Code of Ukraine (hereinafter – Code) for the corporate income tax payers who adjust their financial results before taxation.
Condition for applying such adjustment is that from the total amount (cost) of charitable assistance, more than 4% of the taxable profit of the previous reporting year must be transferred to charitable organizations entered in Register of the non-profit institutions and organizations.
The corresponding changes are provided for by adding Paragraph 72 to Sub-section 4 Section XX "Transitional provisions" of the Code.
Examples
General conditions: Enterprise declared taxable profit (line 04 of the Corporate income tax declaration) in the amount of 1 million UAH for 2024.
Example 1.
Enterprise transferred charitable assistance to organizations registered in Register of the non-profit institutions and organizations in the amount of 70 thousand UAH in the first quarter of 2025, including:
to charitable organization – 50 thousand UAH,
to public organization – 20 thousand UAH.
The estimated 4%limit of the taxable profit in 2024 is 40 thousand UAH; 8% limit of the taxable profit in 2024 is 80 thousand UAH.
Assistance to the charitable organization exceeds 4% limit of the taxable profit in 2024 (50 thousand UAH ˃ 40 thousand UAH), therefore, the enterprise may apply 8% limit of the taxable profit in 2024 for charitable assistance.
Therefore, the enterprise does not make adjustments to financial result before taxation for the first quarter of 2025 according to Clause 1 of Sub-paragraph 140.5.9 Paragraph 140.5 Article 140 of the Code within 8% limit of the taxable profit for 2024 (80 thousand UAH) for operations to provide charitable assistance to the non-profit organizations in the amount of 70 thousand UAH.
Example 2.
Enterprise transferred charitable assistance to organizations registered in Register of the non-profit institutions and organizations in the amount of 70 thousand UAH in the first quarter of 2025, including:
to charitable organization – 30 thousand UAH,
to public organization – 40 thousand UAH.
The estimated 4% limit of the taxable profit in 2024 is 40 thousand UAH; 8% limit of the taxable profit in 2024 is 80 thousand UAH.
Assistance to the charitable organization is less than the established 4% limit of the taxable profit in 2024 (30 thousand UAH < 40 thousand UAH), therefore the enterprise cannot apply 8% limit of the taxable profit in 2024 for charitable assistance.
Therefore, the enterprise increases financial result before taxation for the first quarter of 2025 according to Sub-paragraph 140.5.9 Paragraph 140.5 Article 140 of the Code by the amount of 30 thousand UAH, i.e. in amount exceeding 4% of the taxable profit of 2024 (40 thousand UAH).
It should be noted that the provisions of Paragraph 72 Sub-section 4 Section XX “Transitional Provisions” of the Code are a separate provision, not related to Sub-paragraph 69.6 Paragraph 69 Sub-section 10 Section XX “Transitional Provisions” of the Code.