A right way to raise money for the armed forces of Ukraine using your personal card account


Anatoliy Pashynskyi

Counsel, Attorney-at-Law, PhD

Anticorruption Issues,
Corporate and M&A,
Private Client and Wealth Management

There is hardly any Ukrainian left who has not even tried for the last three months to raise or remit money to meet needs of our military. It is often the case that a Privatbank card number, which is given in the first comment to the social media post, is used to raise funds. However, volunteers are facing the risk of having huge amounts of tax charged if they accept money to their personal bank cards. In this article we are going to focus on how to arrange correctly for money raising to a personal bank card and, in this doing, not to have problems with tax authorities.

What is bad about raising funds to a personal bank card?

From the perspective of the Tax Code, funds received by a volunteer to his or her bank card are a “taxable income.” It means that next year the volunteer will have to file a tax return setting out all funds so received in 2022 and pay the 18% personal income tax and the 1.5% military duty charged on them. If tax authorities find that no such payment is made they may impose fines and penalties. Though the volunteer proves that he or she has spent all of the funds so raised to buy armor vests and quadcopters for our military, this will not spare him or her the legal claims the tax authorities might have.

Yet it is still possible to raise money for volunteering purposes avoiding the payment of taxes. Moreover, no charitable foundation is needed to do this. All you need is to have you and your personal bank account recorded in the special Register of Volunteers.

What is the Register of Volunteers?

It was back in 2014 after the first stage of the Russian-Ukrainian war, when the state established the special Register of ATO [Anti-Terrorist Operation] Volunteers. Those who were recorded in this Register were allowed not to pay the tax of 19.5% on the funds raised if they subsequently spent such funds to help military personnel fighting in the ATO (Joint Forces Operation) area, victims of the Revolution of Dignity, and persons forcibly displaced from the ATO area and Crimea. A list of registered volunteers and their accounts used for money raising were publicly available on the website of the State Tax Service of Ukraine.

The Register was renamed in 2022 after Russia’s large-scale invasion. Now it is the Register of ATO Volunteers and/or Measures to Ensure the National Security and Defense and Deflection and Deterrence of the Armed Aggression of the Russian Federation. A public part of the Register has been concealed for the period of martial law to protect our volunteers from the rashists. However, it is still possible to be recorded in the Register.

What are the benefits from being recorded in the Register of Volunteers?

A volunteer who is recorded in the Register has the right not to pay the 19.5% tax on funds raised to his or her personal account if these funds are further used as charitable aid to combatants and certain other categories of persons (whose full list is given in sub-clause a) of clause 165.1.54 of the Tax Code of Ukraine). Such tax exemption also covers documented expenses incurred by the volunteer to provide such charitable aid (for example, fuel costs to deliver the assistance to its recipients).

It is only the funds used for the aforementioned purposes and transferred to the specific bank account specified by the volunteer during registration that are exempt from taxation. It is desirable to state a “charitable aid” as the purpose of payment of all donations to this account. Moreover, it should be kept in mind that a volunteer will need to confirm that the funds so raised have been used for their designated purpose if there is a tax audit. That is why it is better to keep proofs that the goods were purchased (such as receipts issued by a military store) and confirmations that they were further transferred to the Armed Forces of Ukraine on a no-cost basis (donation agreements, statements of delivery and acceptance, etc.).

Interestingly, such a tax exemption is valid not only for future periods. Furthermore, law allows not to pay taxes on funds received by a volunteer “in the tax year preceding the year of recording in the Register of Volunteers” (sub-clause b) of clause 165.1.54 of the Tax Code). To be more specific, if a person will be recorded in the Register in 2023, he or she will be able to claim a tax exemption relating to all revenues received in the preceding year of 2022 (provided, of course, that they were used for their designated purpose).

How to get on the Register of Volunteers?

Any person who reached the age of 18 may apply for being recorded in the Register. It is not about Ukrainian citizens alone but foreigners who lawfully stay in Ukraine as well.

The procedure for being recorded in the Register of Volunteers is simple and regulated under a special Procedure (Order No. 1089 of the Ministry of Finance dated 30/10/2014). A person must apply using Form No. 1-РВ and provide a copy of the identification code and a bank statement according to Form No. 4-РВ regarding the opening of the account the person intends to use for volunteering. A template application and bank statement may be found in the Procedure itself. 

A volunteer may personally submit a package of documents to any local tax office in Ukraine. He or she is then recorded in the Register within one business day after the documents were accepted.

A fly in the ointment

Unfortunately, the legislation on the Register of Volunteers still has significant gaps.

First, after the Register of ATO (Joint Forces Operation) Volunteers (ATO) was renamed into the Register of ATO Volunteers and/or Measures to Ensure the National Security and Defense and Deflection and Deterrence of the Armed Aggression of the Russian Federation in April 2022, the legislator somehow forgot to update the list of areas for which the funds raised may be spent. The list of permitted areas still indicates that a charitable aid may be given to those combatants only who territorially participated (participate) in “the anti-terrorist operation to deflect and deter the armed aggression of the Russian Federation in Donetsk and Luhansk regions” (sub-paragraph 1) and sub-clause a) of clause 165.1.54 of the Tax Code). It should also be noted that the list of permitted areas of expenses is silent about persons forcible displaced from hotspots in 2022 (such as Kherson, Zaporizhia, Kharkiv Regions, etc.), apart from those who resettled from the ATO area and Crimea. Certainly it may now be interpreted extensively in view that the Register was renamed to make use of the general expression that it is possible to help combatants who “defend (defended) the independence, sovereignty and territorial integrity of Ukraine” (sub-paragraph 1, sub-clause a) of clause 165.1.54 of the Tax Code). Anyway it is still an urgent issue to amend the Tax Code of Ukraine to eliminate the territorial restriction of Donetsk and Luhansk Regions.

The second gap is the period to which the tax benefit applies. Currently, the option not to pay the 19.5% tax is available only for the revenues received after the person was recorded in the Register of Volunteers and “in the tax year preceding the year of recording in the Register of Volunteers” (sub-clause b) of clause 165.1.54 of the Tax Code). The rule that the benefit is applicable to even older revenues is quite logical because few people gave a thought to the formalizing of their volunteering when the war started. However, the rule in its current wording leaves a time gap not covered by the benefit. For example, if a person is recorded in the Register on 5 June 2022, the benefit will apply to future periods, rather than the preceding year of 2021. More so as direct interpretation of the rule prevents from claiming the benefits for the period from 1/1/2022 to 5/6/2022, that is, a part of 2022 when the volunteer was not recorded in the Register. The Verkhovna Rada of Ukraine should eliminate such ambiguity or at least the State Tax Service should clarify it.

* * *

Despite all legislative shortcomings, if a person is recorded in the Register of Volunteers it would be lawful for him or her to raise funds for the Armed Forces of Ukraine using a personal bank card and then claim a tax exemption. Being on the Register, a volunteer has an official legal status that increases public trust in his or her work and facilitates communications with government agencies. Therefore, I urge all of our volunteers to join the Register as soon as possible and go on getting us closer to the inevitable victory over the invaders.

Author: Anatoliy Pashynskyi, Counsel, Attorney-at-Law

Published: НВ.Бізнес, 14 June 2022

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