Ukrainian NGO income report: mistakes that cost non-profit status

A Ukrainian non-profit is removed from the Register of Non-Profit Institutions and Organisations not because of a typo in its report, but because it breaches paragraph 133.4 of the Tax Code: income used outside the statutory purposes, income distributed to founders or board members, or a charter that does not meet the requirements. The report on the use of income only records what has already happened in the books, so the mistakes that cost the status start in primary documents and board decisions.

On 18 September 2026 the Kharkiv regional office of the State Tax Service (STS) reminded all non-profits, including associations of national minorities, how the report is filed. Below we look at these rules from an auditor’s point of view: what the STS and the donor check, which documents to keep at hand and what to do if a breach has already happened. We covered how to fill in individual lines earlier in Report on the use of income of a non-profit organisation: who files, deadlines, mistakes, penalties.

What has changed

There are no new rules in 2026, but the STS highlighted the points where organisations most often go wrong. The clarification: STS Main Office in Kharkiv region.

• The report is filed by every institution and organisation that has non-profit status under paragraph 133.4 of the Tax Code and is included in the Register. For the STS this report is a tax return.
• The form was approved by Ministry of Finance Order No. 553 of 17.06.2016 (registered with the Ministry of Justice on 07.07.2016 under No. 932/29062). Figures are prepared under accounting rules on the basis of properly executed primary documents.
• The annual report is due within 60 calendar days after the end of the year. If the last day falls on a weekend or public holiday, the deadline moves to the next business day.
• The report is filed at the tax address, which is the registered address in the Unified State Register (paragraph 45.2 of the Tax Code). If the organisation moves and its tax office changes, it files after registering with the new office.
• A newly created organisation must file application form 1-RN with the state registrar at registration or with the tax office within 10 calendar days of state registration. Only then does the status apply from the registration date.

Who is affected

• NGOs and unions, charitable foundations and organisations, religious organisations, condominium associations (OSBB) and other organisations with non-profit status;
• grant-funded NGOs where part of the costs is paid by a donor and part by membership fees or donations;
• organisations that changed their charter, address or director during the year;
• new organisations that have not filed a report yet.

What to do and by when

1. Check the charter against the three requirements of subparagraph 133.4.1 of the Tax Code: a ban on distributing income to founders, members, employees (other than salaries and the unified social contribution), board members and their related parties; transfer of assets to another non-profit of the same type or to the budget on termination; inclusion in the Register.
2. List all payments made during the year to founders, board members and their related parties. Each payment must be either remuneration under an employment or civil-law contract, or a statutory expense backed by supporting documents.
3. Check that each significant expense is linked to the purposes and activities in the charter. The law requires income to be used solely to maintain the organisation and pursue its statutory purposes (subparagraph 133.4.2 of the Tax Code).
4. Close the year in the accounting records before preparing the report: income and expenses are recognised on an accrual basis, not by cash movements on the bank account.
5. File the annual report within 60 calendar days after the year end at the correct tax address.
6. If you find an expense outside the statutory purposes, do not wait until the year end (see the table below).

Mistakes that cost the status

• Payments to insiders without a contract. Money paid to a board member or founder without an employment or civil-law contract and without an acceptance act looks like a distribution of income. That is exactly what subparagraph 133.4.1 prohibits.
• Expenses outside the charter. If the purpose of an expense does not follow from the charter, the STS will treat it as non-statutory use. The consequence under subparagraph 133.4.3: removal from the Register and corporate income tax status from the first day of the month following the breach.
• The breach was found but kept quiet until the annual report. The law requires a separate report within the monthly deadline and self-assessment of the tax. Missing that deadline adds a late filing on top of the breach.
• A report prepared from the bank statement. The report is based on the accounting records and primary documents. If figures come from the bank statement and the books are not closed, the report will not agree with the financial statements, and that is the first thing an auditor notices.
• Missing the 10-day window for form 1-RN. An organisation that applies later is not treated as non-profit from its registration date.
• Wartime expenses without documents. During martial law, item 63 of subsection 4 of section XX of the Tax Code does not treat as a breach the transfer of property, services or funds to defence forces, state and municipal healthcare institutions and other recipients listed in that item. The relief only works when the recipient and the transfer are documented.

On penalties: failing to file or filing late costs UAH 340, and UAH 1,020 for a repeat within a year. A penalty does not remove the status, but for a donor it signals weak control over deadlines.

What the auditor and the donor will check

In an audit of financial statements or of a project we reconcile the report on the use of income with the trial balance and the financial statements, review payments to related parties, contracts with board members, decisions on expenses outside the project budget and evidence that aid was handed over. A donor usually asks the same questions from the other side: will the partner lose its status mid-project, and will it have to pay corporate income tax on grant funds. Keep at hand the current charter, an extract from the Register of Non-Profit Institutions, contracts with board members, minutes of decisions and filing receipts.

FAQ

How we help

We review an NGO’s accounting before the report is filed: payments to related parties, whether expenses match the charter, and reconciliation of the report with the financial statements. See NGO audit, accounting for NGOs and accounting recovery. For NGO accountants and managers we run free webinars for NGOs.

Prepared by the MK Audit team