During martial law, businesses are actively involved in volunteer initiatives and supporting the country’s defense capability. At the same time, it is important to ensure the correct documentation of charitable assistance — this is a matter of the company’s tax safety. What are the tax implications of transferring funds or assets to non-profit organizations? What limits apply in 2025, and what exceptions are provided for assistance to the Armed Forces of Ukraine, the Ministry of Internal Affairs, and medical institutions? How can companies avoid unnecessary financial-result adjustments and properly prepare the required documents?
You will find key tax rules, common mistakes, real-life cases, and answers to companies’ most frequent questions in the column by Liudmyla Khimich, Audit Director at Kreston Ukraine.
When Does Charity Affect Profit?
According to subparagraph 140.5.9 of paragraph 140.5, Article 140 of the Tax Code of Ukraine, if a company transfers funds or assets to non-profit organizations, the amount exceeding 4% of the taxable profit of the previous year must increase the financial result, meaning it cannot be included in expenses. However, from 2025 and until the end of martial law, this threshold is increased to 8%, provided that the amount exceeding 4% is directed specifically to charitable organizations included in the Register of Non-Profit Institutions.
Example: if the company’s profit for the previous year is UAH 820 million:
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4% = UAH 32.8 million (no adjustments);
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8% = UAH 65.6 million (if over UAH 32.8 million is directed to organizations with code 0036).
Assistance within these limits does not require tax adjustments. However, it is important to keep in mind that if expenses do not fall within the 4% limit in the first quarter, recalculation will not be possible in the second quarter.
How to Verify the Status of a Non-Profit Organization?
The organization receiving assistance must be included in the Register of Non-Profit Institutions at the moment the aid is provided. We recommend checking the status in advance — not on the day of transfer — using an extract from the Register via the taxpayer’s electronic cabinet or other State Tax Service tools.
Assistance to the Armed Forces, Ministry of Internal Affairs, and Hospitals: What You Should Know
Transfers of goods, services, or funds to the Armed Forces of Ukraine, the National Guard, the Security Service of Ukraine, or municipal medical institutions are not subject to the restrictions set out in paragraph 69.6 of the Tax Code. These expenses are fully included in the company’s expenses without adjustments, regardless of the amount.
VAT on Free-of-Charge Supply
When goods or services are provided free of charge to the Armed Forces, the Security Service, the Ministry of Internal Affairs, etc., VAT invoices are not issued, and VAT rules are not applied.
However, if a company supplies defense products under a contract, it is exempt from VAT but must issue a VAT invoice marked “No VAT”.
Educational Expenses: Pay Attention to Personal Income Tax
Paying for training drone operators may result in the accrual of personal income tax (PIT) if the funds are transferred to the training provider with reference to specific individuals. To avoid PIT, the company must justify that the training is part of vocational education and does not exceed the limits set by subparagraph 165.1.21 of the Tax Code.
Documents That Help Avoid Tax Risks
To avoid issues with tax authorities, it is crucial to properly prepare documentation. The minimum package should include:
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payment documents;
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an order from the company’s director approving the assistance;
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a contract or official request letter from the recipient;
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an acceptance certificate or delivery notes;
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an extract from the Register of Non-Profit Institutions.
The more complete the documentation package, the fewer questions will arise from the tax authorities.
Six Tips from an Auditor
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Distinguish between assistance to the Armed Forces and assistance to other organizations.
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Plan charitable activities considering the 4%/8% limits.
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Check the status of non-profit organizations in advance.
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Prepare documentation thoroughly, even for partner or affiliated organizations.
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Avoid providing personal data to prevent becoming a tax agent.
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Consult with an auditor regularly, as legislation changes frequently.
Charity is a noble gesture. However, to avoid tax risks, businesses must act responsibly: plan expenses, verify the status of recipient organizations, prepare proper documentation, and seek professional advice. Remember that the true value of charity lies not in reports, but in real help provided to our defenders every day.
Audit Director
