The payer of value added tax (hereinafter – VAT) registered a public organization (hereinafter - NGO), whose activities are aimed at helping war victims. In particular, members of this organization systematically provide charity in the form of food to people in need in their area of work. In this case, how to pay VAT and whether it is possible to be exempt from paying tax in the case of charity – read further.
Conditions for providing charity
According to the Law of Ukraine "On Charity and Charitable Organizations" (hereinafter – Law No. 5073 ), a beneficiary is a recipient of charity (in particular, affected people living in a territorial community), who receives assistance from one or more benefactors to achieve the goals defined by Law No. 5073. The goals of charity are to provide assistance to promote the legitimate interests of beneficiaries in the areas of charity defined by Law No. 5073, as well as the development and support of these areas in the public interest (Part 1, Article 3 of Law No. 5073). The subjects of charity are charitable organizations that are established and operate in accordance with Law No. 5073, as well as other benefactors and beneficiaries (Part 1, Article 4 of Law No. 5073).
Art. 6 of Law No. 5073 provides for the possibility of a philanthropist transferring funds, other property, and property rights to the ownership of beneficiaries free of charge in order to achieve certain predetermined goals of charity, in accordance with Law No. 5073. On behalf of and in the interests of the territorial community, acts are committed by local self-government bodies authorized by them ( hereinafter – LSG) (Part 1 of Articles 169, 172, 173, 327 of the Civil Code of Ukraine, Article 60 of the Law of Ukraine "On Local Self-Government in Ukraine").
Thus, if the activity of local government is carried out in the areas specified in Art. 3 of Law No. 5073, subject to compliance with all mandatory conditions stipulated by special legislation, LSGs may receive charitable (including humanitarian) aid for transfer to recipients of chariry.
Administration of taxes and fees
Relations that arise in the field of tax and fee collection are regulated by the norms of the Tax Code of Ukraine (hereinafter – the Code) (item 1.1 of Article 1 of the Code).
Articles 181 and 182 of the Code define the conditions for registration of a person as a VAT payer, according to which the registration of a person as a VAT payer can be carried out both in a mandatory manner and by a person's decision.
In the event that the total amount from transactions for the supply of goods/services subject to taxation in accordance with this section, including transactions for the supply of goods/services using a local or global computer network (in particular, but not exclusively by installing a special application or an application on smartphones, tablets or other digital devices), accrued (paid) to such a person during the last 12 calendar months, in total exceeds UAH 1 million (excluding VAT), such a person is obliged to register as a tax payer with the supervisory authority at their location (place of residence) in compliance with the requirements provided for in Article 183 of this Code, except for a person who is a single tax payer of the first - third groups. (item181.1 of Article 181 of the Code).
For the purposes of registration as a VAT payer, the total volume of transactions for the supply of goods/services includes transactions taxed at any rate of VAT (20%, 0%, 7%, 14%) and exempt from VAT.
At the same time, the transactions provided for in para. 197.1.15 item 197.1 of Article 197 of the Code, carried out during the period of martial law in Ukraine, introduced by Decree of the President of Ukraine "On Introduction of Martial Law in Ukraine" No. 64/2022 of February 24, 2022, approved by Law of Ukraine "On Approval of the Decree of the President of Ukraine "On Introduction of Martial Law in of Ukraine" No. 2102-IX of February 24, 2022, by public associations and/or charitable organizations, are not included by such public associations or charitable organizations when determining the total amount for mandatory registration by the payer of value added tax in accordance with Article 181 of the Code (item 69.12, item 69, para. 10, Chapter XX of the Code).
In view of the above, NGO formed and registered in accordance with the legislation is not subject to mandatory registration by a VAT payer, if the volumes of supply of goods/services in accordance with para. 197.1.15 item 197.1 of Article 197 of the Code exceed UAH 1 million.
According to para. 197.1.15 item 197.1 of Article 197 of the Code the transactions of providing charity are exempt from VAT, in particular the free supply of goods/services to charitable organizations established and registered in accordance with the law, as well as the provision of such assistance by charitable organizations to recipients (subjects) of charity in accordance with the legislation on charity and charitable organizations.
Free supply should be understood as the supply of goods/services to charitable organizations and recipients of charity without any monetary, material or other types of compensation. In case of non-compliance with the conditions specified in para. 197.1.15 item 197.1 of Article 197 of the Code, such transactions are taxed on a general basis.
