Income tax questions

According to the Tax Code of Ukraine (TCU), enterprises paying income tax determine taxable income based on the financial result (profit or loss) calculated according to accounting rules. This financial result may be adjusted (changed) by certain amounts in accordance with the requirements of the TCU.

For enterprises with income of less than UAH 40 million per year (excluding VAT and other indirect taxes), there is an option not to make such adjustments - except for certain cases specified by law.

For example, if a company transfers funds, goods, works or services to non-profit organizations free of charge, these expenses may affect the tax result. Typically, if the amount exceeds 4% of the taxable profit of the previous year, it must be added to the financial result, increasing the amount on which tax is paid.

But there are exceptions, due to the introduction of martial law (from February 24, 2022), special rules apply for the period of its validity. They are defined in paragraph 69.6 of the "Transitional Provisions" of the Civil Code of Ukraine.

It is income tax payers who should not increase their financial result before taxation by the amount of funds or the value of goods that were voluntarily:

• transferred to the Armed Forces of Ukraine, the National Guard, the Security Service of Ukraine, the State Border Guard Service and other military formations;

• provided as humanitarian aid (in accordance with the legislation);

• transferred to accounts opened by the National Bank of Ukraine to support the defense, security, and reconstruction of the country;

• provided to state and municipal healthcare institutions.

That is, these expenses can be included in ordinary expenses according to accounting and do not adjust the financial result for tax purposes.

Therefore, the amounts of money or the value of goods that enterprises voluntarily transferred to the Armed Forces of Ukraine or other state bodies for defense needs or as humanitarian aid do not need to be included in taxable income. They are taken into account as expenses according to accounting rules.