Instituto de Estudios Políticos y Derecho Público "Dr. Humberto J. La Roche"
de la Facultad de Ciencias Jurídicas y Políticas de la Universidad del Zulia
Maracaibo, Venezuela
Esta publicación cientíca en formato digital es continuidad de la revista impresa
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197402ZU34
ppi 201502ZU4645
Vol.41 N° 78
Julio
Septiembre
2023
Recibido el 22/03/23 Aceptado el 11/05/23
ISSN 0798- 1406 ~ De pó si to le gal pp 198502ZU132
Cues tio nes Po lí ti cas
La re vis ta Cues tio nes Po lí ti cas, es una pu bli ca ción aus pi cia da por el Ins ti tu to
de Es tu dios Po lí ti cos y De re cho Pú bli co “Dr. Hum ber to J. La Ro che” (IEPDP) de la Fa-
cul tad de Cien cias Ju rí di cas y Po lí ti cas de la Uni ver si dad del Zu lia.
En tre sus ob je ti vos fi gu ran: con tri buir con el pro gre so cien tí fi co de las Cien cias
Hu ma nas y So cia les, a tra vés de la di vul ga ción de los re sul ta dos lo gra dos por sus in ves-
ti ga do res; es ti mu lar la in ves ti ga ción en es tas áreas del sa ber; y pro pi ciar la pre sen ta-
ción, dis cu sión y con fron ta ción de las ideas y avan ces cien tí fi cos con com pro mi so so cial.
Cues tio nes Po lí ti cas apa re ce dos ve ces al año y pu bli ca tra ba jos ori gi na les con
avan ces o re sul ta dos de in ves ti ga ción en las áreas de Cien cia Po lí ti ca y De re cho Pú bli-
co, los cua les son so me ti dos a la con si de ra ción de ár bi tros ca li fi ca dos.
ESTA PU BLI CA CIÓN APA RE CE RE SE ÑA DA, EN TRE OTROS ÍN DI CES, EN
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Re vicyhLUZ, In ter na tio nal Po li ti cal Scien ce Abs tracts, Re vis ta In ter ame ri ca na de
Bi blio gra fía, en el Cen tro La ti no ame ri ca no para el De sa rrol lo (CLAD), en Bi blio-
gra fía So cio Eco nó mi ca de Ve ne zue la de RE DIN SE, In ter na tio nal Bi blio graphy of
Po li ti cal Scien ce, Re vencyt, His pa nic Ame ri can Pe rio di cals In dex/HAPI), Ul ri ch’s
Pe rio di cals Di rec tory, EBS CO. Se en cuen tra acre di ta da al Re gis tro de Pu bli ca cio-
nes Cien tí fi cas y Tec no ló gi cas Ve ne zo la nas del FO NA CIT, La tin dex.
Di rec to ra
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OIRALITH
M. C
HIRINOS
P
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Co mi té Edi tor
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Al fre do Ra mos Ji mé nez
Go ran Ther born
Frie drich Welsch
Asis ten tes Ad mi nis tra ti vos
Joan López Urdaneta y Nil da Ma rín
Re vis ta Cues tio nes Po lí ti cas. Av. Gua ji ra. Uni ver si dad del Zu lia. Nú cleo Hu ma nís ti co. Fa-
cul tad de Cien cias Ju rí di cas y Po lí ti cas. Ins ti tu to de Es tu dios Po lí ti cos y De re cho Pú bli co
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Vol. 41, Nº 78 (2023), 77-93
IEPDP-Facultad de Ciencias Jurídicas y Políticas - LUZ
Taxation of Charitable Giving in Terms
of Martial Law in Ukraine: Legislative
Novelties and Future Models
DOI: https://doi.org/10.46398/cuestpol.4178.05
Volodymyr Korol *
Oksana Nebyltsova **
Yurii Burylo ***
Vladyslav Teremetskyi ****
Igor Pryianchuk *****
Abstract
The purpose of the article was to reveal the conditions
and consequences of key developments in the Ukrainian tax
legislation, with respect to charitable donations by residents and
non-residents in the context of the martial law regime, but de facto,
large-scale war; as well as to determine models of development
forecasting tax incentives for the post-war period of the restoration of
Ukraine. Interdisciplinary descriptive, analytical and prognostic methods
were used in the development of the research; in particular, comparative,
situational and matrix analysis, interpolation and extrapolation of trends,
conceptual and cognitive modelling. It is concluded that, Ukrainian tax
policy is being signicantly modernized by implementing a wide range
of novelties related to key national taxes, namely: corporate income tax
and individual income tax, to create the most favourable treatment for
charitable donations by individuals, legal entities, charitable organizations
* Doctor in Law, Seniour Researcher, Head of the Private International Law and European Integration
Legal Problems Department, Academician F. H. Burchak Scientic Research Institute of Private Law
and Entrepreneurship of the National Academy of Law Sciences of Ukraine, Kyiv, Ukraine. ORCID ID:
https://orcid.org/0000-0003-3573-3426
** PhD in Economics, Professor, Deputy Head of the International Accounting and Audit Department,
Kyiv National Economic University named after Vadym Hetman, Kyiv, Ukraine. ORCID ID: https://
orcid.org/0000-0002-8931-2021
*** Doctor in Law, Associate Professor, leading research scientist of the Department of International
Private Law and Legal Problems of European Integration of academician F.H. Burchak Scientic
Research Institute of Private Law and Entrepreneurship of the National Academy of Law Sciences of
Ukraine, Kyiv, Ukraine. ORCID ID: https://orcid.org/0000-0001-8743-7739
**** Doctor in Law, Professor, leading research scientist of the Department of International Private Law and
Legal Problems of European Integration of academician F.H. Burchak Scientic Research Institute of
Private Law and Entrepreneurship of the National Academy of Law Sciences of Ukraine, Kyiv, Ukraine.
ORCID ID: https://orcid.org/0000-0002-2667-5167
***** Postgraduate student of Academician F. H. Burchak Scientic Research Institute of Private Law and
Entrepreneurship of the National Academy of Legal Sciences of Ukraine, Kyiv, Ukraine. ORCID ID:
https://orcid.org/0000-0003-0823-6336
78
Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
and business entities. It is expected that the post-war legislative strategy
for taxation of charitable giving will be dierent from the peacetime and
wartime models.
Keywords: charitable donations; tax incentives; war in Ukraine;
humanitarian aid; restoration of Ukraine.
Tributación de donaciones caritativas en términos de derecho
marcial en Ucrania: Novedades legislativas y modelos futuros
Resumen
El propósito del artículo fue revelar las condiciones y consecuencias de
las novedades clave de la legislación scal ucraniana, con respecto a las
donaciones caritativas por parte de los residentes y los no residentes en el
contexto del régimen de la ley marcial, pero de facto, de la guerra a gran
escala; así como determinar modelos de incentivos scales de pronóstico
de desarrollo para el período de posguerra de la restauración de Ucrania.
Se emplearon en el desarrollo de la investigación métodos descriptivos,
analíticos y de pronóstico interdisciplinarios; en particular, análisis
comparativo, situacional y matricial, interpolación y extrapolación de
tendencias, modelado conceptual y cognitivo. Se concluye que, la política
scal de Ucrania se está modernizando signicativamente mediante la
implementación de una amplia gama de novedades relacionadas con los
impuestos nacionales clave, a saber: el impuesto de ganancias empresarial
y el impuesto sobre la renta individual, para crear el tratamiento más
favorable para las donaciones caritativas por parte de las personas, entidades
legales, organizaciones caritativas y entidades comerciales. Se espera que la
estrategia legislativa de la posguerra de impuestos de donaciones caritativas
sea diferente de los modelos de paz y los de guerra.
Palabras clave: donaciones caritativas; incentivos scales; guerra en
Ucrania; ayuda humanitaria; restauración de Ucrania.
Introduction
The unprovoked military aggression against sovereign Ukraine
violating fundamental principles and rules of international law including
international humanitarian one considering laws and customs of war
became one of the key challenges to the civilized world within the rst
quarter of the XXI century.
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CUESTIONES POLÍTICAS
Vol. 41 Nº 78 (2023): 77-93
According to the UN information published by BBC as of August 2022,
there are thousands dead and wounded among civilians and the military,
more than 13 million Ukrainians had left their homes including more than
6 million of internally displaced persons and 6 million leaving to Europe,
where 4 million of them are women and children (Dorosh, 2022).
The enormous scale of humanitarian catastrophe determined
unprecedented intensication of charitable giving on the part of both
residents and non-residents of Ukraine. This phenomenon reects the
positive trend, which can be conrmed by the data of CAF World Giving
Index 2022 indicating that Ukraine is the only top 10 European countries,
moving up the rankings from #20 in 2020 to #10 in 2021 (The Charities Aid
Foundation, 2022).
It is an axiom that peacetime legislative models in general and tax
models in particular cannot objectively be fully eective during wartime.
This issue is system in nature, consequently, it requires the modernization
of tax incentives aimed at proper responding war challenges.
The purpose of the study regarding the above is to reveal Ukrainian
legislation’s key novelty in the eld of direct taxation of charity activity
provided by residents and non-residents by focusing attention on the
main national taxes, namely, enterprise’s assessable prot and personal
income tax in the context of the warfare, as well as development forecasting
of logical-semantic and cause-and-eect models for post-war period of
Ukraine’s restoration.
1. Methodology of the study
The outlined purpose of the study determined its epistemological
approaches to the proper doctrine and methodology. Since there is no
single method of cognition that would provide total knowledge on its own,
it is worth applying a set of methods based on the ability of each of them
to realize its advantages and at the same time compensate for the cognitive
limits of other methods.
To provide the in-depth research alongside with diagnostic (descriptive)
methods, a wide range of interdisciplinary analytical and forecasting
methods are expected to be applied eectively, in particular, comparative,
situational and matrix analysis, trends interpolation and extrapolation,
conceptual and cognitive modelling.
The working hypothesis of the study, which is to be conrmed or
refuted, is that residents and non-residents’ taxation models of charity
activity operated in Ukraine in peacetime have become history and cannot
be preserved during the war or fully returned during the restoration of
Ukraine.
80
Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
2. Analysis of recent research
Having applied literature review qualitative methods, some dominant
trends can be described. Particular attention within in-depth law research
including PhD theses and monographs published in Ukraine in the eld
of private law is focused on the dierent aspects of the civil law status of
charitable organizations, non-prot societies and institutions in the context
of adaptation to EU laws including some features in the eld of charity
activity such as endowments (Kochin, 2020), (Shpuganych, 2018). In turn,
public law research is being conducted in the eld of administrative law
regarding, among others, legal and administrative principles of patronage
(Putayto, 2019), administrative and legal regulation of sponsorship in
Ukraine (Demeshko, 2019).
As a rule, taxation of charity activity is the subject matter of the research
in economics, which can be illustrated by the example of the dissertation with
respect to tax incentives of charitable giving in terms of foreign practice and
prospects of Ukraine (Bobrivets, 2018), PhD in economics scientic article
regarding charity as a source of nancial resources of the population social
protection (Nasibovа, 2020). Issues of charitable giving taxation alongside
with this trend are analysed by practice-oriented experts, in particular,
representatives of the State Tax Service of Ukraine, multinational audit and
consulting companies, for instance, Price Waterhouse Coopers.
Analysis of recent research allows making the conclusion that synthesis
of direct taxation issues of charity, volunteer and humanitarian aid provided
by individuals and legal entities - residents and non-residents in the context
of both warfare and future post-war restoration of Ukraine within one
scientic article denes it as one of pioneering.
3. Results and discussion
3.1. Volunteer activity taxation
The peculiarity of Ukrainian legislation consists of the existence of
three laws related to charity activity and charitable organizations (Law of
Ukraine No. 5073-VI, 2012), volunteer activity (Law of Ukraine No. 3236-
VI, 2011) and humanitarian aid (Law of Ukraine No. 1192-XIV, 1999).
Comparative analysis of their rules determines the correlation between basic
denitions considering charity activity as generic concept and volunteer
and humanitarian aid as the concept’s types. Meanwhile, “The Tax Code
of Ukraine does not distinguish humanitarian aid separately and actually
contains a description of charitable giving taxation” (Savchuk, 2022).
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There are axioms that volunteers became the rst and remain one
the most eective supporters of the Armed Forces of Ukraine, territorial
defense units and other formations in the defense sector.
Taking into account the denition of the Law of Ukraine “On volunteer
activity” as of April 19, 2011 No. 3236-VI with the latest amendments as
of December 13, 2022, it’s worthwhile pointing out that volunteer activity
is immanent signicant peculiarity. Its concept quintessence consists
of asymmetry between volunteers’ legislative permission to receive any
assets free of charge including cash, goods, services, works, property rights
and narrower scope of activity limited by services providing and works
performed to the beneciaries personally without any monetary or material
compensation.
Key problems related to volunteer activity taxation under warfare
concerned the obligation to pay personal income tax after assets receiving
free of charge and the absence of the right to compensate expenses occurred
de-facto documentary unconrmed de-jure. Indeed, an individual or a
volunteer organization may need to receive cash or goods from benefactors
(donors, philanthropists) both residents and non-residents in order to
provide volunteer activity. The amount of such cash or the fair value of
goods under the general tax legislation requirements during peaceful time
shall be included in the gross individual taxable income followed by tax
payment under 18 % tax rate.
Nowadays, the relevant tax treatment has been liberalized by the
Ukrainian Parliament since 24 February 2022 signicantly by means
of implementing the following algorithms. Each volunteer may choose
the appropriate tax model within the alternative - to be or not to be a
taxpayer of individual income tax in part of assets received free of charge.
Implementing of the rst model does not require any additional procedure
steps, in its turn, there are reasons to recognize the second model as much
more eective adopted for the period of martial law in the territory of
Ukraine. Its quintessence is following - the amount of cash and value of
goods received free of charge by volunteers from other benefactors shall not
be included in the gross individual taxable income under certain conditions
regarding:
1. Obtaining the legal status of a benefactor by being included in a
special State Register of volunteers by its holder State Tax Service of
Ukraine which shall be completed during just 1 day after all required
documents submitted.
2. Providing charitable giving (aid) to the certain categories of
beneciaries dened legislatively as exhausted list, namely: a)
participants in hostilities or members of their families; b) employees
of enterprises (institutions), civil defense forces participating in the
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Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
implementation of relevant state measures in the areas of hostilities
directly (as well as their family members); c) natural persons who
live or lived on the territory of settlements where hostilities are
or were taking place and have been forced to leave their place of
residence in connection with hostilities.
The option, that is the right but not obligation, concerning entering in
the State register of volunteers, as a precondition for individual income
tax incentive, became an important legislative novelty. Indeed, the huge
problem was that, during the most awful initial period of Russian military
invasion in February – March 2022, a number of Ukrainian volunteer’s
de-facto received cash on their banking (cards) accounts and goods from
natural and legal persons to support the Armed Forces of Ukraine, territorial
defense units, internal refugees without paying individual income tax to the
state budget and conrming charitable expenses documentary.
De jure it means that the volunteers have been violating the provisions
of the Tax Code of Ukraine (Tax Code of Ukraine No. 2755-VI, 2010),
consequently they can be held liable and pay nes, which should be
recognized as legal, but not fully legitimate. It is the reason for supporting
the supplements of the Tax Code of Ukraine by the Parliament of Ukraine
with a special rule in November 2022, which has retroactive eect.
That rule stipulates that charitable giving shall not be included in the
personal income tax, if it was received during the period from February 24,
2022 to the date of inclusion of the individual in the Register of volunteers.
Simultaneously, a sucient time was given to complete the formal and
legal procedure for inclusion in the mentioned Register, since the deadline
expired just on January 1, 2023.
A little earlier, in September 2022, a reasonable valid alteration was
adapted to the Tax Code of Ukraine, which also had a retroactive eect
stipulating that the requirement for mandatory documentary conrmation
of the expenses by individuals-volunteers was not applied to expenses in
the period from February 24, 2022 to May 1, 2022.
An important positive temporal aspect for volunteers is that “Tax
incentive period is stipulated till December 31, 2023 after of completing
the measures of national defense and security implementation” (Karpenko,
2022).
3.2. Legislative restrictions of charity activity and incentives
towards individuals-entrepreneurs
There are a lot of individuals in Ukraine acting as entrepreneurs
providing prot-oriented activities of the certain types to be xed under
ocial registration procedure. They have the right to choose either general
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CUESTIONES POLÍTICAS
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system of taxation or simplied one within 1-3 groups applying dierent
reduced tax rates.
The vast majority of individuals-entrepreneurs represent the 3d group
within the simplied system of taxation, having the option to apply either
3% tax rate under condition of indirect value added tax payment or 5 %
without VAT. One of the main legislative problems related to such kind of
individuals-entrepreneurs included the barrier to transfer cash to either
charitable organizations or directly to beneciaries as charitable giving.
Individuals-entrepreneurs from the general point of view are permitted
to receive cash free of charge within their commercial activity, which
is recognized as irrevocable nancial aid. Such a transaction results in
including appropriate amount in the entrepreneurs’ taxable income.
Alongside with that, the amount of irrevocable nancial aid received
as charitable giving is not considered to be the income of an individual-
entrepreneur paying a single tax by providing commercial activity (B24
– Information Business Portal, 2019). In accordance with the Art. 177.6
of the Tax Code of Ukraine in case if an individual-entrepreneur receives
income other than the conduction of entrepreneurial activity, such income
shall be taxed under the much higher personal income tax rate of 18% and,
additionally, military collection of 1,5 %.
Concerning the restriction to be a cash donor, representatives of the
State Tax Service of Ukraine emphasized that the provision of nancial aid,
moreover, both revocable and irrevocable, by individuals – entrepreneurs
of 1-3 groups applying the simplied system of taxation belonged to the
sphere of nancial services, namely, intermediation which has been
expressly prohibited for such payers at the legislative level for a long period
(The Main Administration of The State Tax Service in The Ternopil Region,
2021).
We can agree with the experts’ position that, actually, such approach
meant a taboo on the implementation of charity and donations by an
individual-entrepreneur on the simplied system of taxation because
such payments, according to the terminology of the Tax Code of Ukraine,
fully fell under the category of irrevocable nancial aid, meanwhile, such
prohibition was absolutely illogical (Korol, 2021).
Violating the legislative restriction concerning providing charitable
activity led to loosing preferable simplied single tax payer status by
individual–entrepreneur with the obligation to switch to a general taxation
system with the tax rate 18 %.
In the context of Ukrainian tax legislation modernization, it is important
to focus attention on the novelty rule, stipulating that, temporary, namely,
from April 1, 2022 till the until the termination or cancellation of martial
law treatment, individuals - entrepreneurs of the 3rd group being single tax
84
Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
payers under the tax rate 2% are permitted to provide both revocable and
irrevocable nancial aid.
Key problem towards individuals-entrepreneurs who are income tax
payers under the general system lies in the very fact that charitable aid
delivered by individuals–entrepreneurs to the beneciaries were not
recognized as expenses resulted in non-reducing their taxable prot under
the general rule of Ukrainian tax legislation in the peacetime.
This limiting rule was modied after beginning of the military invasion
of Russia. According to the novelty rule - clause 22 of the subsection
1“Peculiarities of personal income tax payment” of the Section XX of the
Tax Code of Ukraine, cash transferred to the Armed Forces of Ukraine and
other formations in the defense sector voluntarily, as well as expenses in
value of property including amount of cash of individuals-entrepreneurs
providing commercial activity conrmed documentary can be taken into
account as a part of expenses.
Thus, Private entrepreneurs registered under the general tax regime
may deduct business expenses and depreciation charges, subject to the
rules established by the Tax Code (PwC, 2023).
3.3. Business entities’ charitable giving taxation
Under the warfare, business entities can grant charitable giving to the
Armed Forces of Ukraine, other public law legal entities in the defense and
security sector directly or through private law charitable organizations,
which can be established as a charity society, institution or fund, herewith,
this list is exhausted.
Indeed, Ukrainian business entities under the general system of taxation
are active in providing social entrepreneurship and transferring assets to
charitable organizations, which can be registered as non-prot ones. At
the same time, they have to comply with the imperative rules stipulating
signicant limitations in regard to dierent approaches of nancial and tax
accounting related to the recognition of charitable giving as expenses.
The amount of the prot of an enterprise taxable is determined on the
basis of nancial statements prepared in accordance with either National
Accounting Standards or International Financial Reporting Standards
followed by its readjustment (increase or decrease) for dierences in taxes
dened in the Tax Code of Ukraine.
Business legal entities may receive both cash including foreign currency
from non-residents and goods (services, works) free of charge from other
economic entities. Such transactions from private law point of view require
the conclusion of a donation contract or similar one. In turn, this transaction
from taxation point of view shall be recognized as irrevocable nancial aid
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CUESTIONES POLÍTICAS
Vol. 41 Nº 78 (2023): 77-93
(which is non-targeted aid in comparison with charitable giving, which is
targeted as a rule) without any tax dierences.
Ukraine implemented charitable giving taxation model for business
entities stipulating deduction of such giving portion from gross enterprise
income generated from the sources both inside and outside with the ceiling
expressed in certain per cent. Thus, when providing charity activity in
times of peace, business entities had the right to add an amount of cash,
as well as value of goods or services transferred free of charge to non-prot
organizations to the corporate expenses in an amount not exceedingly just
4 % of the taxable prot of the previous reporting year.
As far as war requires fundamentally new legislative solutions from the
public authorities to be adopted to stimulate charity activity, the above-
mentioned provision of the Tax Code of Ukraine concerning 4 % ceiling
shall not be applied until the termination or abolition of legal regime of the
martial law on the territory of Ukraine. In order to take advantage of this tax
incentive, i.e. to preserve the amount of nancial accounting taxable prot
without increasing readjustments for dierences in taxes, it is necessary to
comply with the mandatory rules related to:
• rst, the range of property including an amount of cash or value
of personal protection special means (helmets, body Armor,
manufactured in accordance with military standards), technical
means of observation, medicines, food, items of physical support, as
well as other goods, works performed, services provided under the
list of the Government of Ukraine;
• secondly, the manner of transferring above mentioned property -
exclusively volunteer one, which is fundamentally dierent from a
forced alienation of private property or withdrawal state one from
state-owned enterprises;
• thirdly, the list of beneciaries including, in particular, but not
exclusively the Armed Forces of Ukraine, the National Guard of
Ukraine, the Security Service of Ukraine, the Foreign Intelligence
Service of Ukraine, the State Border Guard Service of Ukraine,
the Ministry of Internal Aairs of Ukraine, other institutions
or organizations maintained at the expense of the state budget,
civil defense forces, as well as health care institutions of state or
municipal ownership;
• fourthly, the purposes of charitable giving - the needs of state
defense and provision of humanitarian aid in compliance with the
requirements of the legislation of Ukraine on humanitarian aid in
connection with the military aggression of the Russian Federation
against Ukraine.
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Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
3.4. Taxation of charitable organizations
In accordance with the general preferential rule of the Tax Code of
Ukraine (Art. 197.1.15), provision of charitable aid, in particular, free
of charge supply, i.e., supply of goods or services without any monetary,
material or other types of compensation, to charitable organizations, as
well as provision of such aid by charitable organizations to recipients are
tax-exempt transactions.
The main problems of key subjects – charitable organizations in the
eld of taxation are determined by legislative requirements to act in the
compliance with the purposes and directions of the charity activity dened
in the founding documents. Despite the fact pointed out by the State Tax
Service of Ukraine that this requirement is mandatory (State Tax Service
of Ukraine, 2023), it is worth emphasizing that such approach can be
considered acceptable in peacetime, but unreasonable barrier during the
war.
In the context of the declared state policy regarding the creation
of favorable conditions for intensifying charity activity, charitable
organizations can implement the option stipulated in the Tax Code of
Ukraine. This option provides the acquisition of the legal status of non-
prot organizations or institutions entered in the corresponding state
Register that are not considered to be prot tax payers.
In accordance with the imperative rule stipulated in the Art. 133.4.2 of
the Tax Code of Ukraine, prot (income) of a non-prot organization is
permitted to be used for covering expenses for 1) its maintenance and 2)
achievement of purposes within the scope of charitable activities directions.
In peacetime, violation of the legislative restrictions concerning the targeted
use of assets (cash, goods, property rights) by non-prot organizations in
part of the compliance with the framework of charitable activities and list
of permitted beneciaries resulted in losing of the non-prot legal status.
Such an approach creating risks for charitable organizations as non-
prots is radically modernized, albeit for a certain period of time, namely,
for the duration of the martial law regime. The State Tax Service of Ukraine
emphasizes that non-prot organizations can provide all kinds of charitable
giving to third parties at the expense of their income, even if provision of
any of them is not stipulated in their founding documents. Thus, it is not
currently considered to be a violation of the tax legislation, consequently,
there is no risk of losing their non-prot status (STA, Information letter No.
7/2022).
It is worth adding that the provision of a wider charitable giving
unrelated to the purposes and directions of charity activity is not considered
to be a violation of the legislation under the compliance with certain
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requirement. The quintessence of such a requirement is goods transferring,
services providing and works performing on a voluntary basis for certain
priority needs, namely, defense and security of the state (in particular, for
the Armed Forces of Ukraine, the National Guard Service of Ukraine, the
Security Service of Ukraine, the Ministry of Internal Aairs of Ukraine), as
well as health care facilities of state or municipal ownership.
Alongside with that, it is worth paying attention to the additional
positive legislative novelty that it is not the violation of the tax legislation of
Ukraine, if charitable aid is provided to individuals, who are not founders,
members of non-prot organizations or related persons and who: a) reside
or have previously resided on the territory of a settlement, where hostilities
are being conducted or have been conducted, or b) were forced to leave
their place of residence in connection with hostilities in such settlements.
3.5. Foreign humanitarian aid taxation and incentives
Non-residents of Ukraine have an opportunity to support Ukrainians
by means of providing humanitarian aid to charitable organizations, other
legal entities, as well as individuals whereby both across borders and on
the territory of foreign countries. Such an aid can be provided from abroad
of Ukraine, in particular, in foreign currencies on the banking accounts of
charitable organizations without any legislative barriers and additional
requirements like obligatory sale of a portion of foreign currency earnings,
which was in eect for exporting businesses for a long period before the
war.
Rules regarding taxation of succession shall be applied in cross-border
free of charge receiving both of cash and goods by an individual resident
of Ukraine from a non-resident individual. It means that the amount of
cash or value of goods received shall be taxed under the personal income
taxation rate of 18% with additional 1,5% of military collection.
According to the novelty rule - clause 27 of the subsection 1 “Peculiarities
of paying personal income tax” of the Section XX of the Tax Code of
Ukraine, amount of cash or value of goods (services) provided free of charge
at the expense of budgetary funds of foreign countries and their state funds
to individuals-residents of Ukraine and members of their families of the
rst degree of kinship shall not be included in the gross individual taxable
income.
Indeed, such tax incentive is actual for millions of Ukrainian refugees
being on the territory of EU Member States, Canada, USA, other friendly
countries as far as it is granted just to persons, who suered due to armed
aggression of the Russian Federation against Ukraine and exercised the
right to temporary protection in accordance with the legislation of the
foreign state.
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Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
Taking into account the importance of such a foreign aid, which is
under provisions of public law regulation, the eect of this rule is expanded
towards private law relations by both objective and subjective speckle. Thus,
individual-resident of Ukraine will not have the obligation to pay individual
income tax under certain related conditions, namely: rst of all, receiving
all forms of provision of the specied aid including its recognition as an
additional benet, secondly, receiving such an aid from foreign companies
and organizations carrying out charitable activities in accordance with the
legislation of the relevant foreign jurisdiction.
4. Future models of charitable giving taxation
under Ukraine’s restoration
Considering the temporary nature of the tax incentives disclosed above,
the development of appropriate models within the framework of stimulating
approaches in the post-war recovery period of Ukraine is relevant. Such
future models are likely to be dierent from previous models in order to
provide new balance between public interests of the society and private
interests of individuals and legal entities.
Ukrainians and people supporting Ukraine all around the world hope
for the end of the awful war during 2023. To eliminate consequences of the
uncivilized war at macro level - destroyed thousands of residential buildings,
hospitals, schools, damaged transport and energetic infrastructure, the
wide range of industries – the country will need partner international
assistance of the governments and international organizations by means
of implementing a Marshall Plan ІІ-like the Restoration Plan for Ukraine.
At the same time, at micro level, millions of Ukrainians, in particular,
participants of hostilities, families of fallen defenders of Ukraine, internally
displaced persons, this list is not exhausted, will need social support also
after the end of the war. According to the Art. 1 of the Constitution, Ukraine
is declared to be, inter alia, social state, but it is obviously that public
authorities will not be able to solve all the social issues without charitable
activity provided by individuals and legal entities both by residents and
non-residents. It requires adaptation of the state tax policy to the scale and
conditions of the restoration of Ukraine unknown previously.
Key authors’ conceptual approach to future strategy modelling is that
tax legislation rules before and during the war can be viewed as having
been adopted in fundamentally dierent polar historical conditions.
Consequently, they are unlikely to be appropriate in the new perspective,
but complicated context of Ukraine’s restoration.
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Thus, the strategic task is to oer new models of charitable activity
taxation aimed at balancing, on the one hand, the need to increase
budget revenues, which implies abolishing so-called war tax incentives
to volunteers, charitable organizations and business entities, on the other
hand, stimulation of these subjects to provide charitable giving to those
who need social support as active as possible.
A very important aspect within conceptual modelling is temporal horizon
as it can be considered an axiom that restoration of Ukraine will last much
longer than a couple of years. Accordingly, it is worth developing several
types of relevant models, in particular, the long-term ones designed for at
least 10 years and models to be implemented under certain conditions.
Being one of the key providers of assets transferred to beneciaries both
charitable organizations and directly recipients free of charge, business
entities–legal persons and individuals–entrepreneurs under the general
system of taxation deserve the implementation of special treatment of
prot taxation.
It can be dened as gradual reduction of tax incentives model. Its
quintessence is saving the right of deducting 100% of charitable giving
during a year after the martial law cancelling in Ukraine. Starting from the
second year, the allowed deductible portion is 90% of charitable giving. In
line with this logic, deduction for the 3d year will reach 80% portion of
giving and so on gradually during next seven years. Thus, for the 11th year,
public authority will have a possibility to stipulate the optimal level of a
portion giving deductions allowed between 4% in a peacetime and 100%
during the warfare.
Given the importance of volunteers in the eld of charitable activities,
it is worth preserving personal income tax incentive for them, where
charitable giving is fully deductible for at least 10-years transitional period
after the end of the war.
Oered approach can be extended to individuals – nal recipients in
need of charitable giving or humanitarian aid. It means that such recipients
will not include all forms of giving to the gross individual taxable income.
Herewith, it is said about the giving received from both residents and
non-residents including foreign companies and organizations carrying
out charitable activities in accordance with the legislation of the relevant
foreign jurisdiction.
Considering the role of charity organizations as key subjects in the
eld of charitable activity, it is worthwhile saving them the wider space
for manoeuvre to act out of limits of special legal personality. Thus, the
provision of charitable activity unspecied in their founding documents,
as well as granting charitable giving to the wider range of individuals, in
particular, who were forced to leave their place of residence due to hostilities
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Volodymyr Korol, Oksana Nebyltsova, Yurii Burylo, Vladyslav Teremetskyi y Igor Pryianchuk
Taxation of Charitable Giving in Terms of Martial Law in Ukraine: Legislative Novelties and
Future Models
should not lead to the loss of the status of charitable organizations as non-
prot during at least 7-10 years after the end of the war.
Conclusions
Taxation policy of Ukraine related to charitable giving in the whole and
volunteer and humanitarian aid in particular is signicantly modernized
to respond the challenges of unprovoked war in the center of the European
continent, which is unprecedented after World War II.
It creates favorable conditions to fully implement moral, humanistic
values by benefactors (philanthropists) - residents and non-residents –
individuals and legal entities along with key subjects in this eld, namely,
Ukrainian and foreign charity organizations towards beneciaries, who are
in great need of support and assistance. The range of such beneciaries
includes, in particular, wounded defenders of Ukraine, families of fallen
soldiers and ocers, people who survived the occupation and left their
homes because of hostilities, Ukrainian refugees on the territories of a
number of foreign countries, primarily, women and children.
Ukrainian legislation liberalization in the eld of direct taxation
concerns the key nationwide taxes, namely, enterprise’s assessable prot
and personal income tax, when carrying out transactions of transferring
cash, supply goods, providing services, performing works voluntarily and
free of charge in favor of the Armed Forces of Ukraine, territorial defense
units, the National Guard of Ukraine, the Security Service of Ukraine, the
State Border Service of Ukraine, the Ministry of Internal Aairs of Ukraine
and other institutions in the elds of defense, security, medicine, social
protection, etc.
Looking forward to the end of the war in 2023 and developing the future
post-war models of charitable giving taxation, it is suggested that the best
legislative rules and practices that were introduced after the annexation of
Crimea in 2014, improved and expanded by the Ukrainian Parliament after
the large-scale invasion starting on February 24, 2022 should be preserved.
Alongside with some constants, it’s worthwhile implementing variable part
of tax models stipulating decreasing tax incentives gradually granted at
least for 10 years of transitional period of Ukraine’s restoration.
The restoration of Ukraine will certainly happen and it’ll be successful
with the support of people of good will and kind hearts, foreign countries
like Ukraine’s partners from all over the civilized world.
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Esta revista fue editada en formato digital y publicada
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