Amendments to the Tax Code of Ukraine concerning NGOs (2015)

There were adopted some doubtful legislative acts by the Verkhovna Rada during pre-holiday season. The Law of Ukraine №71-VIII dated the 28th of December 2014 put changes into the Tax Code of Ukraine. A legal non-regulation on taxation of non-profitable organizations  attracts attention.

Visitor doesn’t find the 157 article of Tax Code on the web-site of the Verkhovna Rada. The new edition of the third charter doesn’t have clauses which had regulated taxation of non-profitable organizations previously. These changes are related to other linked articles.

In particular, comparing the excluded 157 article to the new edition of the 133 article, the last one defines a renewed and abridged list of organizations who are not obliged to pay corporation tax.

As it had been previously, there are budget institutions without dividing them into types. That’s why we think that it related to all institutions which are funded by the state budget.

The list of non-governmental organizations which can get a non-profitable status causes interest or even anxiety.

Credit unions, housing-constructive cooperatives, associations of owners of apartment buildings, professional unions, organizations of employees, gardening and garage cooperatives and other associations are not non-profitable organizations anymore according to the new changes.

At the same time public associations, political parties, religious and charitable organizations, pension funds still have this status. The target of these organizations must be not getting profits and distribution of profits among establishers, members, members of management, workers and other persons, if organizations doesn’t want to pay corporation tax. It’s interesting that this clause reduplicates the 11 article of the Law of Ukraine “On charity and charitable organizations”. It means that all above-mentioned organizations are related by the law on charity.

Inclusion on the Register of non-profitable organizations is the second condition of getting a non-profitable status. In order to that it is unclear what organizations, which had been in the Register previously but are excluded now according to the new clauses of the Code, should do. For example, the clauses of the 4 article of the Law of Ukraine “On associations of owners of apartment buildings” defines associations of owners of apartment buildings as non-profitable organizations. It is also unclear whether new organizations of this type must get a non-profitable status.

Also one of the most important matters is collisions in the Tax Code of Ukraine. The 133 article defines that non-profitable organizations mustn’t pay corporation tax. At the same time the 57 article says that they must pay it and submit annual tax declarations to the State Fiscal Service of Ukraine. But lawmaker forgot to define reasons for paying corporation tax.

So now non-profitable organizations which are allowed to do business by profiled laws (for example, public associations can do it according to the 21 article of the Law of Ukraine “On public associations”) can’t take into account the 157 article while dividing their activity into taxable and not-taxable. This problem has to be dealt immediately. We hope lawmaker won’t delay it.

Meanwhile non-profitable organizations should be attentive whether their business activity is taxable. Getting tax advice is one of the options how organizations can secure their activity, explain to themselves position of the State Fiscal Service and guarantee legitimacy of tax payer’s actions.

Despite all difficulties, which are caused by the new legal regulation on a non-profitable status, our company’s lawyers get a decision on inclusion to the Register of non-profitable organizations successfully since the beginning of 2015.

Publication date: 13/02/2015

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