{"id":4687,"date":"2026-11-07T13:28:08","date_gmt":"2026-11-07T11:28:08","guid":{"rendered":"https:\/\/audit-mk.com.ua\/uk\/fop-tsph-chy-trudovyi-dohovir-v-npo\/"},"modified":"2026-11-07T13:28:08","modified_gmt":"2026-11-07T11:28:08","slug":"fop-tsph-chy-trudovyi-dohovir-v-npo","status":"publish","type":"post","link":"https:\/\/audit-mk.com.ua\/en\/fop-tsph-chy-trudovyi-dohovir-v-npo\/","title":{"rendered":"FOP, civil-law or employment contract in a Ukrainian NGO: what an audit finds"},"content":{"rendered":"

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The form of contract is determined by the substance of the work, not the title of the document: if a person performs the duties of a position every day and receives a salary, it is an employment contract under Article 21 of the Labour Code; if they deliver a result or provide a service, it is a civil-law contract or a contract with a sole proprietor (FOP); if they work for free, they are a volunteer. A wrong form turns into reclassification, additional taxes and disallowed costs at audit.<\/p>\n

NGOs and foundations most often go wrong in three places: a FOP consultant in fact works as a staff member, a non-resident works without clarity on how their income is taxed, and volunteers are reimbursed without a contract. Below we go through the rules the auditor and the State Tax Service (STS) apply to each form, and what the documents must show.<\/p>\n

What has changed and which rules apply<\/h2>\n

What matters here is not news but the basic rules in the current versions of the codes, which we checked on zakon.rada.gov.ua. In a grant audit, HR documents are reviewed together with financial ones, so both functions should know these rules. Under Article 21 of the Labour Code, an employee performs the work defined in the agreement, and the employer pays wages and provides working conditions. Under Article 24, an employee may not start work without an employment contract formalised by an order and a notification of hiring to the tax authority. Code text: zakon.rada.gov.ua<\/a>.<\/p>\n

The Civil Code distinguishes a services contract (Article 901: the service is consumed in the course of the action, and the provider renders it personally, Article 902) from a works contract (Article 837: the work is done at the contractor’s risk and the result is handed over to the customer). Article 177.8 of the Tax Code expressly provides for a substance test: the exemption from withholding personal income tax (PIT) on payments to a FOP does not apply if the relationship under the contract is in fact employment. Tax Code text: zakon.rada.gov.ua<\/a>.<\/p>\n

\n\n\n\n\n\n\n\n\n
Form<\/th>\nLegal basis<\/th>\nTaxes on the organisation’s side<\/th>\nWhat the documents must show<\/th>\n<\/tr>\n<\/thead>\n
Employment contract<\/td>\nLabour Code, Articles 21, 24<\/td>\nPIT 18% and military levy 5% withheld; unified social contribution (USC) 22% accrued<\/td>\nOrder, notification to the tax authority before work starts, timesheet, payroll<\/td>\n<\/tr>\n
Civil-law contract with an individual<\/td>\nCivil Code, Articles 901, 837<\/td>\nPIT 18% and military levy 5% withheld; USC 22% accrued<\/td>\nContract describing the service or result, acceptance act, calculation<\/td>\n<\/tr>\n
Contract with a FOP<\/td>\nCivil Code, Articles 901, 837; Tax Code, Article 177.8<\/td>\nNo PIT withheld if a copy of the registration document is provided; no USC if the services match the FOP’s registered activities<\/td>\nCopy of the registration document, contract, act listing specific work<\/td>\n<\/tr>\n
Volunteer<\/td>\nLaw on Volunteer Activity<\/td>\nDocumented reimbursement within Article 11 of the Law is not taxed (Tax Code, sub-paragraph 165.1.65)<\/td>\nWritten volunteer agreement, supporting documents for expenses<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n

Who is affected<\/h2>\n