The situation in Ukraine has sparked a huge social response. Both individuals and companies joined the support. Collections of humanitarian aid, cash and various free services are organised on a continuous basis. This support can be settled in income tax.
From a tax point of view, we can consider Ukraine's assistance in the form of a donation or as the cost of obtaining revenue in the activities of the so-called CSR (social business responsibility).
The cost of obtaining income can include spending on activities related to corporate social responsibility. These are various projects aimed at creating relations with both social partners and with the local community.
The CIT Act allows for deduction from the annual income of donations transferred for purposes resulting from the Act on the activities of public benefit organisations.
It is worth noting that, in order to deduct a donation, it must be transferred to an EU-based organisation, namely financial support for a public benefit organisation based in Ukraine, will prevent us from deducting a donation. CIT payers can deduct to 10% income. (Article 18(1)(1) CIT Act).
If the object of the donation is taxed on goods and services, that tax shall also be deductible accordingly. Remember to exercise due care when documenting a donation.
The taxable persons are required to demonstrate in the annual statement the amount of the aid provided, the amount of the deduction for this purpose and the data of the beneficiary of the deductible donation. Donations shall not be deducted where the taxable person has included them in the cost of obtaining income.
As a general rule, donations must not constitute the cost of obtaining income except for expenditure on the production or acquisition of products transferred to a public benefit organisation.
On the other hand, the cost of obtaining income may include expenditure on activities related to corporate social responsibility. These are various projects aimed at creating relations with both social partners and with the local community.
CSR activities are not usually directly related to the business activity of the entrepreneur, its main objective is to build social ties, improve the image of the company, build a friendly brand reputation.
It is worth noting that such activities are accepted by tax authorities by not qualifying such activities as representations, which are excluded from the possibility of being credited with revenue costs. Some local actions aimed at assisting refugees from Ukraine will certainly be CSR.
However, today there are no reliefs and deductions for the strictly dedicated situations of the outbreak of the war. But as we can see, social groups have already taken action in this direction.
For example, the Association of Accountants in Poland made a petition to the state authorities about tax exemption of income revenues from benefits in kind or money of people who were in Poland due to the war. The Business Centre Club, which asked Prime Minister M. Morawiecki to provide specific assistance to refugees, was also activated.
At the moment, everyone is waiting for a specific position of the Minister of Finance. We will see what relief will come from the entrepreneurs announced by the expert.
Written by Darya Bannaya
Younger tax consultant. Graduate of Law at the Faculty of Law and Administration of the University of Warsaw, graduate of Global Business, Finance and Management in Warsaw School of Economics. Winner of the Ministry of Finance competition “Tax of Leaders” 7. edition. Conducting trainings and conferences for foreigners in tax aspects of conducting and establishing business in Poland.
He specializes in tax law, advising clients on current matters relating primarily to income taxes.
Author and co-author of a tax law publication.