30.07.2020
On July 28, the Draft Law No. 3936 on Amendments to the Tax Code of Ukraine Regarding Disclosure of Information about Funding of Public Associations was registered in the Parliament by MP Oleksandr Dubinsky (The Servant of the People).
This Draft Law is envisages amendments to the Tax Code in line with the Draft Law No. 3564 on Amendments to Some Legal Acts Regarding Transparency of CSOs Receiving Foreign Funding and proposes to introduce additional reporting to Public Associations receiving over 50% of its funding from foreign countries, foreign state bodies, foreign NGOs, international organizations, foreign citizens and stateless persons, including received from technical assistance.,it extends discriminatory provisions, proposed by the Draft Law No. 3564.
It proposes to capture in the Tax Code the requirement for Public Associations,receiving funding from foreign countries, foreign state bodies, foreign NGOs, international organizations, foreign citizens and stateless persons, including technical assistance, to make public on their own website (if available), as well as submit to a state registrar the following information: a list of executive managers of the Public Associations, a number of members and amounts of their membership fees, amounts and aims of revenues and expenses of the Public Associations, participation of managers of the Public Associations in governing bodies of other Public Associations and political parties. Failure to comply with the above-mentioned requirements, as well as violation of the requirements related to the use of the obtained funding by the Public Associations, leads to the expulsion of a Public Associations from the Register of Non-Profit Institutions and Organizations and such organizations are to be 18% income-tax payers.
The Draft Law also proposes a norm, which does not allow legal entities and private entrepreneurs, providing services to Public Associations and/or legal entities, established based on Public Association, to be single tax payers of the first-third groups (simplified taxation system: first group - up to 10% of the living wage; second group - up to 20% of the minimum wage; third group - 5% of income or 3% of income + VAT). However, no specific details are given as to the list of such Public Associations and it means that actually all public associations regardless of their sources of funding fall into this category. Such a restriction in the application of the simplified taxation system for business entities means a refusal to cooperate with Public Associations, as the general taxation system is much more difficult to administer and create an additional tax burden.
This norm is discriminatory, as it restricts legal entities, using the simplified taxation system, in their choice of counterparts for service rendering. And it also restricts Public Associations, which engage legal and physical entities in cooperation or order some services from them.
Declaring the importance to ensure transparency of Public Associations, in fact the authors of these initiatives continue their efforts to establish a strict control over civil society organizations and to exercise the pressure over “inconvenient CSOs”. The Draft Law, if adopted, will have a very negative impact on the activity of the Ukrainian CSOs receiving foreign funding. It will create extra obstacles for the implementation of their goals and objectives.. It will also have the negative impact on business entities, providing services to Public Associations with foreign funding.
More detailed information about the Draft Law is available at: http://w1.c1.rada.gov.ua/pls/zweb2/webproc4_1?pf3511=69609