Estonian parlt's finance committee supports full tax exemption for donations to Ukraine

TALLINN – The Riigikogu finance committee, which on Monday reviewed the amendments received for the second reading of the bill to amend the Taxation Act, decided to add to the bill a provision amending the Income Tax Act to ensure exemption from taxation for donations made for Ukraine even if they exceed the current cap on deductions.

The chairman of the finance committee, Andrei Korobeinik, said the committee decided to add to the bill a provision amending the Income Tax Act to enable tax-free donations to be made to Ukraine via associations listed in the law.

"The draft legislation provides for the exemption from income tax until December 31 of donations and gifts made by resident legal entities for the purpose of preserving the territorial integrity and sovereignty of Ukraine and for the provision and organization of humanitarian aid," Korobeinik said.

The draft sets out a list of associations for the handling of donations, such as the Estonian Refugee Council, Mondo, the Ukrainian Cultural Center, the National Defense Promotion Foundation, the Estonian Red Cross, the Rescue Association, and Rotary Club Tallinn Old Town, the gifts and donations given to whom for the purposes shown in the bill will be tax-free.

Specifically, the authors of the bill stress that coordinated and targeted action is the most appropriate way to deliver assistance.

Proposals filed by the Estonian Chamber of Commerce and Industry, the Estonian Association of Small and Medium-sized Enterprises and the Ministry of Finance, as well as a relevant draft submitted by the opposition Isamaa group were discussed at the meeting. All the initiatives in support of Ukraine had a common goal, but differed somewhat in scope and technical details, spokespeople for the Riigikogu said.

Deputy chairman of the finance committee Aivar Kokk noted that providing a list of eligible associations enables the Tax and Customs Board to check that the donations are delivered in accordance with their intended purpose also without a significant increase in the administrative burden.

Under current law, a taxpayer can benefit from one of two options. Namely, businesses can deduct charitable contributions equaling up to 3 percent of their corporate payroll taxed with social tax, or 10 percent of the profit, for the last financial year.

Kokk added that the amendment would only apply to donations and gifts made to Ukraine.

The plenary of the Riigikogu is scheduled to hold the second reading of the Taxation Act, which provides for the mandatory disclosure of the contracting chain and the time spent by workforce on site in the construction sector, on March 16.