Documentation of expenses when providing charitable assistance

When providing charitable assistance, it is necessary to ensure its documentation. According to the clarification of the State Tax Service (STS), such activities must be supported by appropriate documents.

For many organizations, this issue is currently challenging and especially relevant in wartime.

What is charitable activity?

Charitable activity is assistance on a voluntary and free basis. The provider does not receive any profit, including any monetary compensation or reward.

The donor transfers funds, property rights, or property free of charge to the recipient based on Law No. 5073.

According to this law, services, goods, or works provided on a free basis include:

• goods under a gift agreement,

• services or works that do not involve compensation for their value,

• goods transferred for safekeeping.

Budget institutions, including state authorities, cannot be donors.

Documenting cash charitable assistance

Charitable assistance in cash can be received either in cash or to a bank account. To confirm that the funds have been transferred to the institution's special account, a bank statement must be obtained.

When providing charitable assistance to the institution’s cash register, an incoming cash order must be prepared, and a receipt should be sent to the donor.

Thus, to confirm the transfer of charitable funds, the following are required:

• an expenditure cash order,

• a bank statement,

• a payment order,

• or an act of issuing and receiving financial assistance.

Documents for confirming the provision of charitable assistance in the form of property

To avoid the risk of a tax audit and to conduct charitable activities transparently and legally, relevant documents must be available for each transaction.

It is mandatory to conclude an agreement and an act of acceptance and transfer of property.

The agreement is concluded in writing or electronically. The document specifies information about the property and the purposes of its transfer. Additionally, a request letter from the recipient of charitable assistance may be provided.

The act of acceptance and transfer of charitable assistance is a document that confirms the transfer of property to another party. The act must specify:

• the name of the document,

• the details of the parties,

• the date of its preparation,

• the purpose, content, and scope of assistance,

• signatures of the parties.

It is also necessary to provide a detailed description of the property, its quantity, and value.

The agreement and the act are complementary documents. They confirm the movement of charitable funds or property.

The recipient of charitable assistance, upon receipt, must have a power of attorney or any document that certifies the authority of such a person.

And most importantly: when filling out the report on the receipt and distribution of humanitarian assistance for the tax office, the company must ensure the availability of the necessary primary documentation. The documents must be drawn up in accordance with the requirements of Article 9 of Law No. 996.

Only acts of acceptance and transfer that have been properly executed can confirm the use of received charitable assistance for its intended purpose.

When volunteers provide charitable property or funds, this operation must be recorded in the relevant report with all the necessary details.

Order on providing charitable assistance

The head of the organization providing charitable services issues an order that specifies several details:

• the type and amount of charitable assistance,

• the purpose of its provision,

• the details of the recipient party,

• data of authorized persons responsible for the transfer of charitable funds or property.

Documenting fixed assets from a donor

Such assets can only be accepted by a commission of the recipient institution. It is created by the order of the head. The commission must include accountants or economists.

When charitable assistance in the form of fixed assets is received by the institution, it is necessary to:

• draw up an act of acceptance and transfer of fixed assets: the document should indicate the value of the received property. The act is made in two copies and approved by the head of the institution;

• prepare an act of putting fixed assets into operation: it should describe the characteristics of the received property, and indicate the availability of accompanying technical documentation;

• create a record card for the received fixed assets.

Accounting and distribution of humanitarian assistance

Bill No. 9111 provides for simplifying the procedure for accounting, distribution, and import of humanitarian assistance by charitable organizations. The document includes the following provisions:

• mandatory accounting of humanitarian assistance in an automated electronic system;

• expanding the list of recipients beyond registered charitable foundations and public organizations in Ukraine;

• the ability to provide vehicles as charitable assistance to the military.

Is it possible to provide scanned copies of documents?

Although the law does not directly prohibit this, the tax office does not recommend doing so. The reason is that scanned copies are not considered primary electronic or paper documents. Therefore, the organization providing charitable services should have and provide only the original.

Charitable assistance to the army

A charitable foundation can provide this type of assistance only to those military organizations that are non-profit institutions and are included in the appropriate register.

When preparing documents, the following wording must be specified: «assistance in defense capability and mobilization readiness of the country», in accordance with Law No. 5073.

Funds from charitable contributions can only be accepted to special bank accounts registered with the State Treasury.

To report to the STS, the following are required:

1. Primary documents: a bank statement on the receipt of funds, an act of acceptance and transfer, an invoice-request when providing material resources.

2. A written agreement: the document should contain all the details of both parties and detailed information about the amount of assistance, characteristics of the provided property, etc.

3. A request letter from the recipient about the need for such assistance.

4. An order from the head regarding the allocation and provision of charitable assistance.

What is the liability for the lack of primary documents for the donor?

The liability of the donor for the lack of necessary documentation may include:

• a fine from the STS in the amount of 1020 UAH;

• administrative liability in the form of a fine ranging from 170 to 250 UAH.

What does the Tax Code say?

Article 140 of the Tax Code does not provide for the adjustment of income and expenses when providing charitable assistance to individuals who pay personal income tax. However, the donor is still required to keep accounting records and reflect the movement of funds, property, etc.

That is, an individual or organization engaged in charitable activities is obliged to keep records of income and expenses related to taxable objects. To do this, it is necessary to prepare and fill in the primary documentation.

Along with this, a bunch of accounting registers, financial statements, and other documents related to tax calculation follow.

Automation of charitable activities

Therefore, to simplify tax reporting and financial accounting, it is better to install the Torgsoft program. It is easy to use, even without an accounting background. The accounting software can also automate charitable activities and free you from routine tasks.

Torgsoft is about freedom of action and convenience: the program itself generates daily reports, creates various types of financial documents, and helps you easily control the movement of money and goods.

And most pleasantly, all the necessary information is always at hand. By installing the Torgsoft mobile app, you can keep records and manage reports from anywhere.