Humanitarian aid to Ukrainian citizens at company costs

In response to the unique attitude of Poles, including Polish entrepreneurs, who already from first days of conflict in Ukraine have offered a wide range of material assistance to a huge number of refugees since March this year regulations were introduced to the Polish legal order to take into account the expenditure on this aid in the cost of obtaining revenue.

In the light of the Income Tax Act[1] the cost of obtaining revenue is the costs associated with the production or purchase price of the item or rights which have been donated since the start of the conflict (24 February 2022) up to day 31 December 2022 and costs incurred for unpaid benefits to counter the effects of war on Ukraine.

In view of the legislator’s decision that the aid in question is to be institutional rather than individual, it is necessary for donations to be transferred one from institutions included in a closed catalogue, including:

• NGOs and other regulatory actors included in Act dated 24 April 2003 on public benefit and voluntary activities, or equivalent organisations as defined in the legislation governing public benefit in force in the territory of Ukraine,
• local government units,
• voivodes,
• Government Strategic Reserve Agency,
• entities performing medical activities or medical rescue activities in the territory of the Republic of Poland or Ukraine.

In the margins, it should be noted that during the last months of the regulation under consideration, in response to the government's urgent need for an amendment, this catalogue has been, with retroactive effect, since the date of 24 February 2022, supplemented by voivods. Thus donations made to the governors from the date 24 February 2022 up to day 15 April 2022 (The date of entry into force of this amendment to the beneficiary catalogue) can benefit from this solution.

In addition, the possibility of including these expenditures in company costs is required that they are not previously included in these costs, including through depreciation write-offs.

At the same time, in view of the relevant exclusion, from the perspective of the beneficiaries of the above-mentioned donations, the donations received are not included in the revenue and therefore the calculation of income tax should not be taken into account.

In the light of these regulations, taxpayers should bear in mind that the use of the possibility of recognising donations related to countering the effects of the conflict in Ukraine is not entirely arbitrary and the aid should be provided to the specific entities mentioned in the Act. It is therefore worth ensuring that the principles of cooperation with these entities are formalised in order to document them for the purposes of settlement of income tax.

Author: Jan Markowicz Lawyer, graduate of the Faculty of Law and Administration of the University of Silesia in Katowice in the direction of Law. In professional practice, it focuses on the legal and tax service of economic operators and individuals. Author of publications and articles on tax law.