What taxes does a charitable foundation pay in Ukraine? Accountant for a charitable foundation

The work of charitable organizations and foundations in Ukraine is reaching a new level. Today, many foreign organizations and investors are ready to provide their assistance to charitable and non-profit organizations in Ukraine, but most importantly, such assistance is needed and even badly needed.

But it is not enough to register a charitable foundation and develop its goals and mission. The foundation, like other organizations in Ukraine, has to keep accounting, to account for the funds it receives in its accounts, and where it spends them. Incorrect accounting of the charitable foundation will lead to the loss of the non-profit status, to additional taxes, and even to fines.

We will tell you what you need to know about keeping accounts for charitable organizations in Ukraine.

If you would like to entrust the task to professionals, please contact our experts to form a package of services.

Related article: I registered a charitable foundation in Ukraine - what next? How to work with charitable help?

First: the charitable foundation and income

A charitable foundation can receive several types of income: earmarked income, non-targeted income, and passive income. 

Earmarked income is funds received for a specific project. That is, you have the objectives of the foundation, and the received funds have the purpose corresponding to the objectives of the foundation, or you start a separate project within the foundation and collect funds specifically for this project.

Non-purpose - funds received without a purpose. Such funds can also be further allocated to the objectives of the fund or allocated for specific projects.

Passive income - funds, which the foundation does not receive as a direct transfer of funds for the purposes of the foundation, but using the funds/assets it has. For example, if the fund rents out some of its premises, or invests its funds in a bank with interest.

Second: expenditures of the charitable foundation

The main mistake is the further distribution of funds not for the purposes of the fund. But this is possible. The Foundation is a working organization, which needs a place to operate, which means it needs a room. And also - it needs staff, payment for utility bills and many other things. There is a certain rule of expenditure of the fund - no more than 20% of the received funds can go on unearmarked expenses.

Both expenses and income must be reflected in the organization's accounting documents. A charitable foundation is a non-profit organization, so it does not pay taxes on the incoming funds. But only if it is not proven that it conducts profitable activities. 

For example, a charitable foundation did not receive money, but rather, let's say, material goods - chairs, tables, furniture, etc. And it was money that was needed. The fund decides to sell such things, and to deal further with the money. Will such activities be considered profitable? Would not the fund lose its non-profit status?

The answer is no, if the amount to be raised from the sale will go to cover the target costs of the fund. On the other hand will be, if there will be a distribution of income among the participants. The main point is in the proper conduct and registration of the transaction.

Related article: Registration of a charitable organization in Ukraine and recruitment of volunteers.

How about getting a cryptocurrency charity?

Today, officially registered charities have the right to accept funds, including in cryptocurrency. The most difficult thing is converting cryptocurrency into regular currency or transferring the cryptocurrency itself further to cover the expenses (goals) of the fund.

Does the charitable fund pay any taxes?

The fact that incoming aid to the accounts of a charitable foundation, if properly accounted for and distributed, is not subject to taxation, does not mean that the foundation will not pay taxes at all.

So, if a charity fund has employees (not volunteers), who work in the fund under an employment contract, their salaries are taxed in Ukraine.

Our accountants can help you prepare all the necessary documents and templates for the activity and accounting of the charitable organization without any problems. If you do not have your own accountant we can offer our services as outsourcing.

Service of registration of a charitable foundation in Ukraine.