Many individuals and companies are currently engaged in providing in-kind and financial assistance to those affected by the armed aggression against Ukraine.
The Ministry of Finance plans the introduction of further tax reliefs and solutions – in addition to those already existing – to facilitate the transfer of such aid. The facilitations will apply both to those who provide such assistance and those who receive it.
On 7 March 2022 the Cabinet of Ministers adopted a draft law on assistance to citizens of Ukraine in connection with the armed conflict on the territory of the country, which presents in particular the following tax solutions:
- income taxes PIT and CIT:
- donations for purposes related to counteracting the effects of warfare on the territory of Ukraine will be recognised as tax-deductible expenses
- applicable only if provided through specific organisations (i.e. non-governmental organisations, including Ukrainian ones, local government units, the Government Agency for Strategic Reserves, entities performing medical and emergency rescue activities on the territory of Poland and Ukraine),
- applicable to the cost of production and purchase of goods, as well as costs incurred for free-of charge benefits provided in the period from 24 February to 31 December 2022,
- possible as long as these expenses have not been previously included in tax costs in another way, including through depreciation write-offs,
- the cost of such donations and free-of-charge benefits will not be taken into account when calculating the loss and the share of income for the purposes of the so-called minimum CIT,
- in correspondence to the above – entities receiving such donations or free-of-charge benefits between 24 February and 31 December 2022 will not recognise taxable revenue,
- PIT exemption for humanitarian aid received from individuals and companies by Ukrainian citizens arriving in the territory of the Republic of Poland from Ukraine (currently benefits received exclusively through non-governmental organisations are not taxed)
- according to the information published on the governmental website, the exemption is to apply to such assistance as e.g. provision of housing, provision of food, financing of medical treatment,
- exemption from PIT/CIT for Polish taxpayers receiving cash benefits for providing assistance to Ukrainian citizens on the basis of an agreement concluded with the municipality
- the cash benefit can be granted for a period not longer than 60 days,
- is to apply to entities providing accommodation and meals to Ukrainian citizens who found themselves on the territory of Poland in connection with military operations,
- inheritance and donation tax
- introduction of a tax exemption for donations received by Ukrainian citizens coming to the territory of the Republic of Poland from Ukraine (the exemption will apply between 24 February to 30 June 2022).
The bill is currently after the second reading in the Parliament (Sejm).
VAT solutions were also adopted in an accelerated mode:
- as of 5 March this year, the Regulation of the Minister of Finance entered into life, which introduced the 0% VAT rate for free-of-charge deliveries of goods or provision of services for the purposes of assistance to victims of warfare in Ukraine,
- it applies to supplies and services provided exclusively to specific entities, i.e. the Government Agency for Strategic Reserves, medical entities and local government units, and under the condition of concluding a written agreement confirming that the supplied goods or services will be used for purposes related to assistance for victims of the consequences of military actions on the territory of Ukraine,
- the 0% VAT rate applies to services made from 24 February to 30 June 2022, although the government does not rule out extending it.
What preferences are already in place?
The Polish tax system already has a number of solutions in place that allow for preferential taxation when certain aid activities are undertaken for Ukraine. Currently, the tax solutions include, in particular:
- donations to non-governmental organisations (PIT and CIT):
- preferences apply to donations made, inter alia, for public benefit activities carried out by non-governmental organisations (Public Benefit Organisations (PBOs) and foundations and associations without such status), operating within the EU and EEA,
- taxpayers (both natural persons and entrepreneurs) can deduct donations made in kind and in cash from their income up to 6% of their income – in the case of PIT taxpayers and up to 10% – in the case of CIT taxpayers,
- the necessary condition for the deduction is to document the donation (payment receipt, declaration of the beneficiary and documents indicating the donor’s data and the value of the donation),
- the deduction is made in the annual tax return,
- preferences for blood donors (PIT):
- donations made for the purposes of blood donation carried out by honorary blood donors are deductible from income (the equivalent that a donor would be entitled to for donating blood or plasma is deductible, according to the conversion rate, one litre of blood is 130 PLN),
- the amount limits of the above-mentioned relief are considered together with donations for public benefit,
- donations of food products (PIT, CIT and VAT):
- entrepreneurs may claim as tax deductible costs the cost of production or purchase price of foodstuffs donated to public benefit organisations for the sole purpose of their charitable activities (such donations are exempt from VAT, the right to deduct input VAT is also retained),
- CSR relief effective from 2022 – support for the activities of sports clubs, cultural and educational institutions (PIT and CIT):
- the relief may be used by entrepreneurs (both natural persons conducting business activities and legal persons) other that those taxed with the lump sum and who meet certain conditions indicated in the regulations,
- under the relief, entrepreneurs can include 150% of the amount allocated for the support of activities of sports clubs, cultural and educational institutions that fulfil the conditions specified in the tax regulations as tax deductible costs,
- the relief relates to CSR activities, which, in principle, may constitute a tax deductible cost (and not constitute donations),
- the relief may cover e.g. advertising and promotional expenses, costs incurred for sports scholarships, scholarships for students and doctoral students and many others.
We will monitor the progress of the Ministry of Finance’s introduction of the announced tax reliefs and will inform you about them on our blog.
If you have any questions regarding application of tax reliefs, please do not hesitate to contact us.
