Donations for Ukraine – deduction from the income tax base
On 9 March 2022, the Government submitted to the Chamber of Deputies a draft amendment to the Income Tax Act to support humanitarian and charitable activities of income tax payers in connection with the support of Ukraine and its people during the war conflict.
The key points of the amendment are the increase of the temporary limit for deduction of donations from the tax base to 30% for the taxable period of the calendar year 2022 as well for individuals and the taxable period ending from 1 March 2022 to 28 February 2023 for legal entities.
It is also proposed to expand the range of entities to which donations may be made, including the purpose of the donations. Without the amendment, it would not be possible to deduct a donation made to a third country, including Ukraine, from the tax base. As regards the purpose, it is possible that the option to deduct from the tax base a donation in support of the defence efforts of the Ukrainian state (e.g. equipment for soldiers) will eventually be approved.
At the same time, the exemption for gifts received by the recipient should be extended to gifts made for the purpose of supporting Ukraine’s defence efforts in 2022. Furthermore, for Czech tax non-residents (residents of Ukraine), such gifts would be exempt from withholding tax in the Czech Republic.
The income of Ukrainian employees should also be exempt from tax if the company provides them and their family members with accommodation in the Czech Republic due to the war conflict in Ukraine. Furthermore, if an employee receives a monetary gift from his or her employer to help in a difficult life situation, this gift should be exempt from income tax as a gratuitous transaction received for humanitarian or charitable reasons.
The question is when and in what form the act will be approved, but it is expected to be retroactive from 1 January 2022. We will continue to monitor the legislative process.