Payments by corporate cards in non-profit organizations: what you need to know?
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Non-profit organizations, like regular commercial businesses, have the right to use various payment methods.
Currently, the most prevalent options include cash, transferring funds to a bank account, online payments through a payment system, or using an electronic wallet.
While cash transactions and payments through a bank account are standard procedures for most organizations, online payments present a distinctive feature.
In this article, we will elaborate on a practical alternative to cash and explore methods of online payment tailored for non-profit organizations—specifically, corporate cards designed for these entities.
What is a corporate card for a charitable fund or non-governmental organization?
A corporate card serves as a tool for financial transactions. Simply put, it is a regular bank card registered with the organization's funds.
What are the advantages of using a corporate card?
- The cardholder can make payments in physical stores, conduct NFC contactless payments, or make online payments without the necessity of having cash (either personal or provided by the organization).
- There is no need to perform cash transactions: receiving cash from the bank, accounting for it in the organization's cash register, or disbursing funds to an accountable person.
- 24/7 access to funds and the possibility to make payments at any time.
- A convenient method for expense monitoring, tracking payments made with corporate cards, and controlling the remaining unused funds by organization employees.
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What transactions can a non-profit organization make using a corporate card?
A non-profit organization has the right to make payments for any economic needs that align with the organization's statutory objectives. In other words, a corporate card can be used to pay for various goods and services within the scope of the organizational goals, such as:
- Purchasing goods for subsequent charitable contributions.
- Settling representational expenses (official receptions, cultural programs, etc.).
- Covering business travel expenses.
- Procuring office supplies (stationery, office equipment, furniture, fuel, etc.).
- Similar expenditures.
Please note! It is strictly prohibited to transfer salaries and other mandatory social payments (vacation, sick leave, insurance, etc.) to corporate cards.
Types of corporate cards for charitable funds or non-governmental organizations
There are two commonly used types of corporate cards: the key card to the account and the employee/volunteer corporate card.
Key Card to the Account is the organization's bank card issued exclusively to the account owner, typically the director/chairperson or president of the organization with the right of the first signature.
This corporate card is issued to the owner when opening a bank account.
The card details are identical to the main bank account details, and the funds on the key card equal the total organization's funds.
The currency of the key card is in hryvnia (UAH).
Please note! Organization leaders should exercise caution when making any online payments. The key card is listed both in the business cabinet of the non-profit organization and in the general list of personal cards of the leader. Instances have occurred where leaders unintentionally used the corporate card for personal expenses. Such actions violate the rules for using corporate funds. However, there is a way to rectify this mistake without incurring penalties and additional tax charges:
- The leader returns the funds to the organization's current account.
- A "blank" expense report is prepared, indicating the use and return of monetary funds.
A corporate Card is a bank card issued to employees or volunteers of the organization.
For each corporate card, an individual bank account is opened, and it is assigned to its owner (employee or volunteer).
Note: All corporate cards are associated with a specific legal entity. If an employee resigns, they cannot continue using the same corporate card.
To deposit funds onto such a corporate card, the manager (or another person responsible for payment transactions) needs to transfer funds from the main account to the account specific to that corporate card.
The currency of the corporate card can be in hryvnia, euros, or dollars.
Please note! Corporate cards in dollars and euros are opened by legal entities only to send employees on business trips abroad. Transactions in foreign currency on the territory of Ukraine are prohibited.
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Documentary confirmation of expenses and reporting on the use of funds with a corporate card
Funds utilized through a corporate card are treated as an advance issued, subject to subsequent reporting.
Please note! All transactions conducted with a corporate card must be accompanied by documentary confirmation.
Amounts used without proper documentary confirmation are subject to taxation as additional income. Tax recalculations involve an 18% personal income tax and a 1.5% military fee, with subsequent deductions from the employee's salary for those who fail to provide documentary confirmation.
For more details on additional income, refer to our previous article here.
To prevent tax recalculations, owners of corporate cards must report to the organization within 5 working days from the moment of fund utilization.
What documents are included in the report on the use of corporate funds?
- Expense report (under the approved form by the Ministry of Finance as of the reporting date);
- Receipts, payment receipts, expense invoices, certificates of services received, and other documents confirming the expenses incurred.
TOP 5 Questions About Corporate Card Payments
Can I pay for advertising, video conferences, and email campaigns with a corporate card (Meta, Zoom, MailChimp, etc.)?
Yes, you can make payments for these services with a corporate card in hryvnia. The payment will be converted at the bank's exchange rate.
Can I make payment for a foreign economic contract with a corporate card or a key card?
No, settlements for foreign economic contracts are made based on a payment order and a package of documents approved by the bank.
What are the consequences of using corporate card funds for personal needs?
If an employee accidentally (not intentionally) spends funds from the corporate card for personal needs, they are required to return the funds to the company's account within 3 banking days from the moment the situation is discovered.
If an employee intentionally spends corporate funds and refuses to return them, the organization imposes an additional benefit charge equal to the spent corporate funds and withholds an 18% personal income tax and a 1.5% military fee from the amount spent. The withheld taxes are paid from the employee's salary.
If funds are credited to my corporate card, do I have any restrictions on the timeframe for their use? For example, should I use them no later than the 3rd working day?
No, there are no restrictions on the timeframe for using the funds. Crediting money to a corporate card is not considered an advance issuance (accountable funds). The funds can be used at any time when needed. Reporting is based on the actual use of funds from the corporate card.
Can I withdraw cash from the corporate card?
Yes, corporate cards allow for the withdrawal of cash from an ATM. However, in the case of cash withdrawal, the possible reporting period for the used funds is reduced to 3 working days.
Do I have the right to receive payments from other individuals on the corporate card, including payment for the company's goods/services or charitable contributions/donations?
No, receiving funds from the sale of goods/services (including charitable contributions/donations) on the employee/volunteer's corporate card is prohibited. The employee/volunteer's corporate card is replenished only by crediting funds from the organization's current account.
However, if you want to receive donations on the card, you can use the details of the key card owned by the manager. In this case, the funds are credited to the organization's current account.
How to obtain a corporate card for a charity foundation or NGO?
Getting a corporate card is quite straightforward. The main requirement is to have an open account for the nonprofit organization in a banking institution. We assist in opening such accounts when registering nonprofit entities.
Corporate cards, such as "key cards," are issued to the director when opening a bank account. However, if you haven't received a corporate card, you simply need to contact the bank branch where the organization's account is held or apply for a card through online banking.
To obtain corporate cards for employees/volunteers of the organization, they need to visit the bank branch (where the bank account is held) and submit an application for opening corporate cards. To process the card, the following information about the employee/volunteer is required:
- Phone number;
- Tax identification number (TIN);
- Full name.
If you want to streamline the handling of accountable funds in a nonprofit organization, corporate cards are the solution for you.
Our specialists can assist you in:
- Opening corporate cards during the registration process or organization of the charity foundation or NGO.
- Establishing a reporting process for the use of corporate funds in the organization.
- Providing accounting support and submitting reports to regulatory authorities.
Feel free to reach out to us if you are planning to register a nonprofit organization and operate in Ukraine.