Financial assistance from a foreign state to a Ukrainian citizen: legal aspects, taxation and practical advice

In today's context of martial law, massive migration of Ukrainians abroad, and large-scale international support, the issue of receiving material assistance from foreign countries has become very important. Increasingly, Ukrainian citizens are receiving financial or humanitarian aid not only from international organizations, but also directly from foreign governments. In this article, we will consider, whether such assistance is subject to taxationWhat documents are required to confirm its legitimacy, and how to avoid possible legal risks.

1. What is considered material assistance from a foreign state

Under material assistance refers to any gratuitous provision of funds, things, services or other benefits that a citizen receives from the government agencies of another country. This may include:

• financial assistance (accommodation payments, compensation, social programs to support refugees);

• humanitarian aid (food, clothing, medicines, equipment, etc.);

• housing support (payment of rent, accommodation, utilities);

• integration, vocational training or retraining programs.

Such payments are made in accordance with the laws of the donor country and usually have social, not commercial, nature.

2. The legal nature of aid in terms of Ukrainian legislation

According to of the Tax Code of Ukraine (TCU)According to the Law, any income of an individual is subject to taxation in Ukraine, unless otherwise provided by international treaties. Therefore, the question arises: is aid from a foreign state considered income?

According to subparagraph 165.1.54 of the TCU, are not included in taxable income the amount of material assistance provided by international or foreign organizations, if such assistance is provided as part of humanitarian or charitable activities.

Thus, humanitarian or social assistance from a foreign state is not taxableif it meets the specified criteria and can be documented.

3. Taxation and reporting

If the assistance is received through official support programs, such as state employment services, social funds, or charitable institutions, it usually does not require declaration in Ukraine.

Another situation is when a citizen receives money transfers without a clearly defined status (e.g., from government agencies of another country without an official letter of appointment). In this case, the tax authorities may consider such funds as foreign incomewhich is subject to taxation at the rate of 18% + 1.5% of military duty.

To avoid this, it is worth keeping all documents confirming the humanitarian or social nature of the aid:

• official notifications from the donor government agency;

• certificates of recipient status (refugee, temporary protection, etc.);

• bank statements indicating the purpose of the payment;

• copies of regulations or programs under which the payment was made.

4. 4. International legal guarantees

Ukraine is a party to a number of international agreements that provide for exemption of humanitarian aid from taxation. In particular, in accordance with the Geneva Conventions and EU Council Decisions, aid aimed at overcoming the consequences of war, natural disasters or humanitarian crises cannot be considered commercial activities and is not subject to taxation.

In addition, most countries that provide financial support to Ukrainians stipulate in their legislation that such assistance should exclusively social in nature and is not subject to refund or taxation.

5. Practical recommendations for beneficiaries

1. Check the source of payments. If the assistance comes from an official state or international fund, keep the documents that confirm this.

2. Do not use such funds for entrepreneurial activities. Otherwise, they may be recognized as profit.

3. Keep all documents. In the event of an audit, the tax service may require confirmation that the funds are for humanitarian purposes.

4. Consult a lawyer or accountant. Each situation is unique, especially if payments are received regularly or from different countries.

5. Stay tuned for new clarifications from the State Tax Service. Tax legislation in this area is constantly being clarified.

6. Conclusion.

Financial assistance from foreign countries is an important tool to support Ukrainian citizens during the war and the country's recovery. However, to avoid misunderstandings with the tax authorities, you should clearly distinguish between humanitarian aid and incomekeep all supporting documentation and, if necessary, seek legal advice.

Ukrainian legislation is gradually adapting to modern challenges, and in the future we can expect clearer rules for taxation of international aid. But right now, citizens have all the legal grounds to receive support from foreign countries without the risk of double taxation or fines.