Ivan Maryniuk, Head of Tax Law Practice at Ilyashev & Partners Law Firm

In the context of war and the influx of international aid, tax and regulatory compliance has become a critically important element for the successful implementation of humanitarian and development projects in Ukraine. It is not only a legal requirement but also a key tool for ensuring transparency, accountability, and the efficient use of funds.

Tax and regulatory legislation is evolving dynamically in response to the challenges faced by the state and its citizens during armed aggression. Rules for applying tax benefits and exemptions for the supply/import of humanitarian and infrastructure-critical goods often change, as do registration procedures and financial monitoring rules. Control over the targeted use of assistance within humanitarian projects has been strengthened.

Under such conditions, the role of a local legal advisor becomes strategic. They assist donors and implementers not only in complying with the law but also in planning operations to avoid delays, minimize tax liabilities, and ensure the uninterrupted delivery of aid. This enables projects to achieve their humanitarian goals faster, more safely, and with maximum impact.

Tax Challenges for International Organizations

VAT Exemption under ITA Projects

International Technical Assistance (ITA) is one of the main tools for mobilizing resources to support and rebuild Ukraine. For donors and implementers, it offers the possibility to operate under tax benefits, directly impacting the scale of project implementation.

Under Ukrainian tax law and international treaties, the supply/import of goods and services within ITA projects is exempt from VAT and customs duties.

This special tax regime may be used by international organizations and donor institutions financing registered ITA projects, by implementers working under such projects and using goods and services exclusively for their implementation, and by suppliers of goods and services if their products are supplied directly for the needs of the project and financed from ITA funds.

A key prerequisite for exercising the right to tax benefits is proper registration of the project with the Secretariat of the Cabinet of Ministers of Ukraine (CMU Secretariat) and the inclusion of project details in the ITA Projects (Programs) Register.

All transactions must be supported by the project’s registration card and relevant agreements clearly specifying the source of funding and the intended use of expenditures.

Even minor formal inaccuracies in documentation can result in denial of benefits or additional tax assessments. For example, the absence or delay in obtaining the registration card automatically leads to the loss of VAT exemption, while incorrect or incomplete information in contracts and reporting documents may cause customs or tax authorities to treat the supply as a standard commercial transaction.

Losing the right to tax benefits means not only additional expenses for the project budget but also possible reductions in aid volumes or delivery delays.

Other Tax Benefits

In addition to ITA-related exemptions, Ukrainian legislation provides for several tax reliefs and special regimes for organizations implementing humanitarian and charitable initiatives.

Charitable and humanitarian organizations recognized as humanitarian aid recipients may import equipment, vehicles, construction materials, medical equipment, and other goods without paying import duty and VAT.

As a general rule, for this to apply:

  • The shipment must be officially recognized as humanitarian aid under the Law of Ukraine “On Humanitarian Aid.”
  • The list of goods and their intended use must match the declared purpose and the decision of the competent authority.
  • Customs clearance must be carried out with a customs broker, with the mandatory indication of the decision number recognizing the cargo as humanitarian aid.

During martial law, the Cabinet of Ministers of Ukraine has introduced a simplified, declarative procedure for recognizing aid as humanitarian.

When working with local charitable and non-profit organizations and providing them with targeted funding, donations, or grants for charitable and humanitarian purposes, such assistance is exempt from corporate income tax if these organizations are listed in the Register of Non-Profit Institutions and Organizations and comply with non-profit requirements. These requirements include: using funds exclusively for statutory purposes, having all expenses documented, and avoiding transactions that qualify as profit distribution among founders or related parties.

Failure to meet these requirements can result in the loss of non-profit status and taxation of the received funds.

The most common mistakes in humanitarian and charitable operations include non-compliance with the rules for targeted use of funds and errors in primary and reporting documents.

Regulatory Support and Public Law. Registration of ITA Projects

The registration process for ITA projects can be divided into the following stages:

Preparatory Stage – At this stage, an agreement (memorandum, technical specification, activity plan, etc.) is signed to confirm the agreed objectives, tasks, and activities between the donor and the recipient (beneficiary), as well as a contract between the donor and the implementer for project execution (the main document during implementation).

The donor and implementer agree on the procurement plan for goods and services funded by ITA, as well as designate subcontractors/suppliers.

The implementer and the ITA recipient prepare an application for state registration of the ITA project and attach documents supporting the information provided. The beneficiary (a public authority or other state body) prepares a letter expressing support and interest in the project’s results and granting consent to carry out the activities specified in the contract between the donor and the implementer.

All documents submitted to the CMU Secretariat must be in Ukrainian, with copies duly certified.

In its practice, Ilyashev & Partners Law Firm applies a comprehensive approach, acting as a coordinator among all ITA project participants (donor, implementer, beneficiary, and recipient) during registration, ensuring that the necessary document package is prepared and the process accelerated.

Approval Stage – This involves reviewing documents for compliance with legislation and Ukraine’s strategic priorities, verifying alignment with state and sectoral programs, and preparing the project’s registration card. The CMU Secretariat reviews the documents and issues a decision within 10 working days.

Registration Stage – If the documents meet all requirements, the project is officially registered, confirmed by the project’s registration card, and entered into the ITA Projects Register.

The procurement plan is a key document in the registration process for applying tax and customs benefits. Changes to the list or value of goods and services after registration may require re-approval or amendments. Discrepancies between the procurement plan and project documentation can cause customs delays.

Proper registration that accounts for all logistical and financial plans ensures not only preferential treatment but also uninterrupted project implementation.

Contracts and Commercial Law

In international humanitarian and development projects, contracts with contractors are not only tools for regulating mutual obligations but also essential elements of tax security. The clarity with which tax provisions and applicable law are set out in the contract directly affects project stability.

To avoid unforeseen tax charges and penalties, contracts should expressly state:

  • The source of funding for the work or services (e.g., ITA funds or a humanitarian program).
  • The tax status of the transaction with reference to the Tax Code or international agreements.
  • The allocation of tax obligations between the parties (who is responsible for withholding and paying taxes, especially when dealing with non-residents).

Such provisions reduce the risk of shifting the tax burden from the contractor to the project and help preserve the budget.

Resolving Tax and Customs Disputes

Even with careful planning and proper documentation, humanitarian and development projects may face tax and customs disputes. Causes include differing interpretations of the law, legislative changes, or formal errors in documents.

Typical disputes involve denial of tax benefits or additional VAT assessments. Tax or customs authorities may refuse exemptions, citing missing documents, non-compliance of goods with the declared purpose, or re-characterizing transactions as ineligible for benefits. Disputes also arise over customs classification, customs value, country of origin, or whether cargo qualifies as humanitarian aid.

Such disputes may be resolved through:

  • Administrative procedures – preliminary consultations, filing objections to inspection reports, appealing decisions to higher authorities of the State Tax Service or State Customs Service of Ukraine.
  • Judicial remedies – court proceedings to protect rights and benefits.

Strategies for International Donors and Contractors in Ukraine

International humanitarian and development projects in Ukraine require not only funding and organization but also professional management of tax and regulatory risks. Observing several key principles at the planning stage significantly increases the chances of successful, uninterrupted implementation.

  • Preliminary Tax Due Diligence – Before launch, conduct a comprehensive risk assessment: verify the applicability of benefits to specific transactions, align customs procedures with a broker, and identify potential “bottlenecks” in logistics and contracts.
  • Engagement of Local Advisors at the Planning Stage – One of the most common mistakes is seeking legal assistance only after problems arise. Local experts engaged early can help adapt procurement and logistics plans to Ukrainian requirements, minimize risks of benefit denial or customs delays.
  • Proper Documentation – A complete and properly executed set of documents is key to applying tax benefits. All agreements should clearly reference funding sources and legal grounds for exemptions, and any changes to project documentation should be promptly registered.

Maximizing Impact Through Legal Expertise in Tax and Regulatory Matters

A systematic approach to compliance in humanitarian and development projects enables donors and other participants to avoid unnecessary time and cost losses, maintain a reputation as a reliable partner, and focus on the core goal – achieving humanitarian and development objectives.

Engaging experienced local advisors at the planning stage allows optimal use of tax and customs benefits, building a contract and documentation framework that meets legal requirements and donor conditions, and ensuring quick, effective responses to any disputes with tax or customs authorities.

Ilyashev & Partners Law Firm is open to cooperation with international organizations and donors implementing or planning humanitarian and other development programs in Ukraine. The firm’s expertise in supporting humanitarian and charitable projects, as well as institutions and organizations, across tax, corporate, labor, and regulatory law ensures transparency, legality, and maximum efficiency in the use of resources to support Ukraine.

Ilyashev & Partners Law Firm provides full legal support for international technical assistance (ITA) projects, humanitarian aid operations, and development programs in Ukraine. Our expertise includes securing VAT and customs duty exemptions, project registration, contract structuring, and tax dispute resolution. We help donors, implementing partners, and NGOs achieve full compliance with Ukrainian tax and regulatory requirements, ensuring smooth logistics, legal certainty, and efficient use of resources. With a proven track record in tax law, public law, and customs compliance, we are your trusted legal partner for impactful projects in Ukraine.

To learn more, please visit the Ilyashev & Partners Law Firm website or contact Ivan Maryniuk directly.

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