Koordinační výbor k otázce darů v souvislosti se situací na Ukrajině

Coordination Committee on the issue of donations in the context of the situation in Ukraine

We have previously informed you (HERE) about the law on tax measures in connection with the armed conflict in Ukraine ("Lex Ukraine"). In practice, the application of this law has raised a number of questions. Some of the questions were also discussed within the Coordination Committee (HERE) of the Chamber of Tax Advisors and the General Financial Directorate ("GFD").

Among other questions, the paper addressed the situation when an employer announces for employees a collection of monetary or non-monetary contributions which are subsequently used, for example, for charitable or humanitarian purposes related to the situation in Ukraine.

According to the GFD, in a situation where the ownership over the donation is firstly transferred from the employee to the employer and further from the employer to the final recipient, the receipt of the donation constitutes taxable income for the employer. On the other hand, the value of a non-monetary donation may be considered a tax deductible expense if the conditions of the "Lex Ukraine" law are met. In other cases, the value of the donation will be considered a tax non-deductible expense (where the value of the donation can be deducted from the tax base if other law conditions are met). 

The GFD also accepts that if the employer can prove a direct link between the donation received from employees and the tax non-deductible expense, such income may be considered taxnon-effective. However, in such a case, it will not be possible to deduct the donation from the tax base at the same time. 

In the case where the ownership over the donation is transferred firstly from the employees to the employer and only in a second step from the employer to the final recipient, in the opinion of the GFD the respective employee is not entitled to deduct such a donation from the tax base.  

For the sake of completeness, we would like to point out that the conclusions of the coordination committees are not legally binding, but tax authorities generally respect them in practice.

We would also like to point out that the above brief commentary cannot replace a detailed tax analysis of a specific situation. We will be happy to help you with this topic or any other tax aspects.

If you have any questions, please contact the authors of this article or the EY tax team with whom you regularly work.

Authors:

Ladislava Zamazalová

Ivan Zhurkin