"Help to save life of a child", "Collecting means for operation", "Number of charity account is..." Every one of us has come across such announcements and wondered whether to help, transfer the money and how much. The family of a sick person thinks only about how to save his life. They sell apartments, cars, summerhouses, jewelries, and open charity accounts in banks. On TV and internet, there are announcements with a cry for help and a number of bank account.
Whatever the story is in every separate case, all families face the same problem - taxation of personal income. According to Ukrainian legislation, money on charity account is considered an income, thus beneficiaries must pay 15% tax. If, for example, you have received 500 thousand hryvnias of donation, you must pay UAH 75 thousand to the state treasury. But where can a family take this kind of money after spending every cent on operation? ForUm has decided to ask "mediators" about possible loopholes Ukrainians can find to overcome the system - Ukrainians themselves do not want to talk about it.
Charity bank account: what's the catch?
Anyone can appear in a situation, when stratospheric sums of money are needed to help a dear person. Even if a family sells everything possible at an auction, it might not be enough to cover expenses. In such cases, families open bank accounts. "When a family opens charity account, it does not think about legislation. However, our legislation sets a limit for private donations - up to two thousand hryvnias - a ridiculous sum of money for those who need hundreds of thousands. Even if a family needs to buy a wheelchair, it costs more than two thousand hryvnias. The sum over two thousand is considered an income, and the beneficiary must pay the tax. Taking into account the fact that people collecting donations need the last cent, they simply cannot pay this tax," executive director of the Ukrainian forum of charity providers Anna Gulevskay-Chernysh says.
According to her, if a charity organization donates wheelchairs to the disabled, for example, this very fund pays the tax. "But when a family collects money on the charity account, sooner or later it appears in the situation when the tax must be paid. Stressed people do not think about any taxes. Their only goal is to save a dear person," she adds.
However, this problem has a solution, but only specialists know which one. "There are two ways to avoid taxpaying. The first one is when the treatment is paid by a charity fund. But in this case, every region must have sufficient number of charity funds, specialized in helping patients to collect donations. Money goes to the fund for treatment of a concrete person. When the fund pays for the treatment of this person, no taxpaying is required. However, the problem is that people do not trust funds. Some latest scandals have discredited the funds. Our task is to regain people's trust in charity funds, as there are many professional organizations, which can help. People living in small towns and villages must know about them," Anna notes.
The second way is improvement of the legislation, she adds. "The new Tax Code has introduced changes, according to which donations for foster homes and family-type children's homes are not taxed. Now funds can buy apartments, houses, household appliances for single moms, for example. Though the sums exceed two thousand hryvnias limit, the tax is not paid," Anna explains. In this respect, charity funds hope that Ukrainian MPs will introduce similar changes regarding charity bank accounts.
How to avoid taxpaying
There have not been headline-making cases on this issue in Ukraine, Anna says. "Authorities sympathize with such families. Probably, the families make deals with the tax police, I don't know. Besides, tax control system is far from perfect in our country. If it was properly organized, we would hear about many trials," she believes.
The state tax service of Ukraine was also kind to answer ForUm's questions and explain how to avoid taxpaying in case of donations. "According to the article170 of the Tax Code, targeted donations from legal entities or individuals are not considered a taxable income if they are aimed for medical institutions as payment for treatment of:
- a taxpayer or a member of his immediate family;
- a disabled (both adults and children);
- a child with a disabled parent;
- an orphan or half-orphan;
- a child from a large or low-income family;
- a child whose parents are deprived of parental rights;
- for purchasing medications, costing more than the state medical insurance can cover.
The exceptions are esthetic operations, sex affirmation surgery or other atypical situations," the state tax service informs.
In case the money for treatment of a child is transferred to the account of a parent, it is considered as off-target donation. If the sum exceeds the limit of 1500 hryvnias (in 2012), a taxpayer must declare it as income and pay the tax.
If Ukrainians citizens transfer means to the account of a foreign hospital as payment for treatment of a child, the Tax Code does not consider it a targeted donation. "If the sum exceeds the limit of 1500 hryvnias (in 2012), it is liable to the personal income tax at the rate of 15(17)%," the state tax service adds.
Note
In order not to be trapped by the conflict of law, the state tax service recommends people to transfer money not to a bank charity account, but directly to the account of a hospital of interest. In turn, the Ukrainian forum of charity providers asks people to appeal to charity funds, where there are specialists able to help with law nuances. To check whether this or that charity fund is trustworthy, it is recommended to appeal to the Ukrainian forum of charity providers, which unites all charity funds of Ukraine, working legally and publicly.
Tetyana Hryhoriyeva
Whatever the story is in every separate case, all families face the same problem - taxation of personal income. According to Ukrainian legislation, money on charity account is considered an income, thus beneficiaries must pay 15% tax. If, for example, you have received 500 thousand hryvnias of donation, you must pay UAH 75 thousand to the state treasury. But where can a family take this kind of money after spending every cent on operation? ForUm has decided to ask "mediators" about possible loopholes Ukrainians can find to overcome the system - Ukrainians themselves do not want to talk about it.
Charity bank account: what's the catch?
Anyone can appear in a situation, when stratospheric sums of money are needed to help a dear person. Even if a family sells everything possible at an auction, it might not be enough to cover expenses. In such cases, families open bank accounts. "When a family opens charity account, it does not think about legislation. However, our legislation sets a limit for private donations - up to two thousand hryvnias - a ridiculous sum of money for those who need hundreds of thousands. Even if a family needs to buy a wheelchair, it costs more than two thousand hryvnias. The sum over two thousand is considered an income, and the beneficiary must pay the tax. Taking into account the fact that people collecting donations need the last cent, they simply cannot pay this tax," executive director of the Ukrainian forum of charity providers Anna Gulevskay-Chernysh says.
According to her, if a charity organization donates wheelchairs to the disabled, for example, this very fund pays the tax. "But when a family collects money on the charity account, sooner or later it appears in the situation when the tax must be paid. Stressed people do not think about any taxes. Their only goal is to save a dear person," she adds.
However, this problem has a solution, but only specialists know which one. "There are two ways to avoid taxpaying. The first one is when the treatment is paid by a charity fund. But in this case, every region must have sufficient number of charity funds, specialized in helping patients to collect donations. Money goes to the fund for treatment of a concrete person. When the fund pays for the treatment of this person, no taxpaying is required. However, the problem is that people do not trust funds. Some latest scandals have discredited the funds. Our task is to regain people's trust in charity funds, as there are many professional organizations, which can help. People living in small towns and villages must know about them," Anna notes.
The second way is improvement of the legislation, she adds. "The new Tax Code has introduced changes, according to which donations for foster homes and family-type children's homes are not taxed. Now funds can buy apartments, houses, household appliances for single moms, for example. Though the sums exceed two thousand hryvnias limit, the tax is not paid," Anna explains. In this respect, charity funds hope that Ukrainian MPs will introduce similar changes regarding charity bank accounts.
How to avoid taxpaying
There have not been headline-making cases on this issue in Ukraine, Anna says. "Authorities sympathize with such families. Probably, the families make deals with the tax police, I don't know. Besides, tax control system is far from perfect in our country. If it was properly organized, we would hear about many trials," she believes.
The state tax service of Ukraine was also kind to answer ForUm's questions and explain how to avoid taxpaying in case of donations. "According to the article170 of the Tax Code, targeted donations from legal entities or individuals are not considered a taxable income if they are aimed for medical institutions as payment for treatment of:
- a taxpayer or a member of his immediate family;
- a disabled (both adults and children);
- a child with a disabled parent;
- an orphan or half-orphan;
- a child from a large or low-income family;
- a child whose parents are deprived of parental rights;
- for purchasing medications, costing more than the state medical insurance can cover.
The exceptions are esthetic operations, sex affirmation surgery or other atypical situations," the state tax service informs.
In case the money for treatment of a child is transferred to the account of a parent, it is considered as off-target donation. If the sum exceeds the limit of 1500 hryvnias (in 2012), a taxpayer must declare it as income and pay the tax.
If Ukrainians citizens transfer means to the account of a foreign hospital as payment for treatment of a child, the Tax Code does not consider it a targeted donation. "If the sum exceeds the limit of 1500 hryvnias (in 2012), it is liable to the personal income tax at the rate of 15(17)%," the state tax service adds.
Note
In order not to be trapped by the conflict of law, the state tax service recommends people to transfer money not to a bank charity account, but directly to the account of a hospital of interest. In turn, the Ukrainian forum of charity providers asks people to appeal to charity funds, where there are specialists able to help with law nuances. To check whether this or that charity fund is trustworthy, it is recommended to appeal to the Ukrainian forum of charity providers, which unites all charity funds of Ukraine, working legally and publicly.
Tetyana Hryhoriyeva
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