A farmer who receives a grant from a Ukrainian charitable fund or public organization should be prepared to receive a quarter less than stated in the contract. Expert Olga Ivankiv explained the mechanism of taxing grants from Ukrainian resident organizations and shared how to properly plan a project budget.
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Ivankiv immediately stated the key rule: if a grant is provided to an individual or an individual entrepreneur from a Ukrainian resident organization — which can be a charitable fund, public organization, or another legal entity — such a grant is taxed according to general rules. The standard rate is: 18% personal income tax plus 5% military fee. Together, this amounts to 23% of the grant sum.
But the most interesting part is not in the taxation fact itself, but in the mechanism of its implementation. The expert explained a fundamental feature: the resident organization is a tax agent. What does this mean in simple terms? The organization providing the grant is obliged to withhold these taxes itself and transfer them to the budget before the money reaches the farmer’s account.
“The recipient of the grant should receive the funds already minus 23%,” explained Olga Ivankiv. In other words, the farmer will not receive the full amount to then pay taxes themselves. No, the organization immediately gives the state its share and transfers the rest to the farmer.
To make it clearer, the expert gave a specific example with numbers. Let’s say the approved grant budget is 100,000 hryvnias. From this amount, the donor organization will transfer 18,000 hryvnias as personal income tax and another 5,000 hryvnias as a military fee. As a result, only 77,000 hryvnias will be credited to the recipient’s account.
“It is important to understand the consequences for you in this case. You need to understand what budget you are forming because this is targeted funding,” warned Ivankiv. Because a grant is not free money. It is funds for a specific project with clearly defined expenditure items. And suddenly it turns out that there are a third less real funds than planned.
The expert detailed two possible budget planning scenarios. The first option is when the farmer estimates a budget of 100,000 hryvnias, details all expenses: equipment purchase, materials, services. And then it turns out that only 77,000 hryvnias are in the account. To carry out all planned work and purchases, one will have to find 23,000 hryvnias of their own funds.
“This can be an unpleasant surprise if taxes are not taken into account in advance. Many farmers fall into such a trap,” noted Ivankiv.
The second option, according to the expert, is much wiser. Some donors who have already gained experience and understood all the nuances immediately include taxes in the project budget. Formally, the total grant amount is still 100,000 hryvnias, but the budget clearly states: 18,000 — personal income tax, 5,000 — military fee, and 77,000 — the actual budget for project implementation.
“If resident organizations have already figured out that these funds are taxable, then the taxes will be transferred directly to the budget. You will plan a budget for 100,000 hryvnias, but it will include 18% and 5% as separate items,” explained Olga Ivankiv.
With this approach, the farmer immediately understands with which real amount they will work and can correctly allocate funds by expenditure items. There are no unpleasant surprises at the money-receiving stage.
The expert also talked about a pleasant bonus for grant recipients. Those who receive grants from Ukrainian resident organizations do not need to submit any additional reports to the tax authorities. None at all. The resident organization takes care of everything: withholds taxes, transfers them to the budget, submits tax reports indicating information about the granted amount and withheld taxes.
“You simply receive the funds and fulfill the grant contract conditions. You only report to the donor on the use of funds, but not to the tax authorities for their taxation,” summarized Olga Ivankiv.
She emphasized: the most important thing is to clarify during negotiations with the donor how taxation will be carried out. Whether taxes are included in the total amount as separate items, or if they will have to be covered from the funds actually received. This will determine whether you can implement the project in full or if you will need to seek additional funding or adjust plans.