Donations to Ukraine – Deduction from the Income Tax Base

15. June 2022 | Reading Time: 2 Min

We would like to inform you that the amendment to the Income Tax Act, which extends tax reliefs for charitable activities in connection with the support of Ukraine and its people during the war conflict, has been adopted.

The amendment expands the range of recipients to which donations may be made as well as the purpose of the donations. It is now possible to deduct from the tax base a donation provided directly to the State of Ukraine or its territorial units and to individuals or corporations domiciled in Ukraine – without the amendment, it would not be possible to deduct a donation made to a third country from the tax base. As regards the purpose, it is now also possible to deduct a donation provided in support of the Ukraine´s defence efforts (e.g. military defence material).

At the same time, the amendment also increases the temporary limit for deduction of donations from the tax base to 30% for the year 2022, both for individuals or corporations (for corporations for the tax period ending from 1 March 2022 to 28 February 2023).

Moreover, non-monetary donations provided to individuals or corporations domiciled in Ukraine in connection with the support of Ukraine may be used directly as a tax-deductible expense (unless the donation is used as a tax deductible item). For individuals – tax residents of Ukraine, who prove that their income from the Czech Republic amounts to at least 90% of their total taxable income, will be able to reduce their tax base for donations (according to the current legislation, only Czech, EU or EEA tax residents can deduct the donations).

As for the recipient of the donation, the amendment extends the application of income tax exemption to situations where the donation is received in support of the Ukraine’s defence efforts. The taxpayer providing the donation would therefore not have to pay withholding tax in the Czech Republic.

As for employees, the amendment exempts the non-monetary income in the form of accommodation provided by the employer to employees and their family members ( i.e. those residing in Ukraine and who left the country in connection with the war) as well as a monetary donation received from employer in connection with aid in a difficult life situation.

These changes apply to all those who have provided and will provide donations in 2022, even before the entry into force of this amendment.

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