Which organization is better to register?
The best forms of legal entities for volunteer purposes are charity organizations or NGOs.
What is the difference?
The main difference between these entities is their purpose. NGOs are created to protect rights and freedoms, satisfy public interests, or resolve specific issues. A charitable organization meant for a charity. Different laws regulate the work of these organizations. A charitable organization can have one or more founders, whether two or more persons can found an NGO. Both organizations can obtain non-profit status.
What is non-profit status, why does one need it, and how to get it?
This status frees you from income tax on the funds you received. To obtain it, you need to submit a separate application to the local office of the State Tax Service within 10 days after registration, using the №1-РН form. Such an application can be submitted directly in the office or remotely via the electronic taxpayerʼs office.
In the organizationʼs charter, it is necessary to mention that the founders do not have the right to distribute the received income among themselves (you can find detailed info on this in paragraph 133.4 of the Tax Code of Ukraine). After consideration, the tax service department will enlist the organization into the Register of non-profit organizations.
You should keep in mind that you will not be able to apply for non-profit status to the State Tax Service headquarters in Lviv Oblast if the office of your organization is registered in Kyiv. Local tax authorities accept applications only from legal entities registered in their oblasts.
Is that enough to start raising money for military needs?
No. Not every charity organization (CO) has the right to raise funds for the needs of the Armed Forces and purchase bulletproof vests, helmets, or thermal imagers for our soldiers.
To do this, one should directly mention such an area of charitable activity in the CO Articles of Association. It should be formulated as "promoting the defense and mobilization readiness of the country, protecting the population in peacetime and wartime emergencies." The wording of the Articles of Association, which allows the CO to engage in "all statutory areas of charitable activity," is also considered acceptable.
Is it possible to use an NGO for charity?
The law does not prohibit NGOs from conducting charity. At the same time, Pashinsky strongly recommends formalizing the relevant activities directly in the NGOʼs Articles of Association. At the same time, charity should not be the NGOs primary purpose; it has to be only one of the additional areas of activity.
If the NGO engages in charity without a corresponding article in its Articles of Association, it risks losing non-profit status and facing additional income tax accrual. Pashinsky notes that if you systematically plan to raise funds in large quantities, it is better to register a charity organization than an NGO. Its regulations are much better suited for such purposes.
Isnʼt it easier to raise money on a personal card without registering anything?
Many volunteers now indeed do not register organizations and raise funds using personal cards. However, from the tax legislation point of view, such revenues can be perceived by the tax authorities as personal income with the subsequent accrual of 18% of the Personal Income Tax and 1.5% accrual of the military tax on the amounts of money received.
In comparison, creating a non-profit organization has several serious advantages. First, charitable income to the account of a non-profit organization is not taxed. Secondly, the status of a registered organization makes it easier to purchase things abroad and import them to Ukraine. It also facilitates contractual work. Creating a legal entity also allows for better organization of internal processes and increases peopleʼs trust in a particular team of volunteers.