Receiving grants can help businesses deal with the consequences of full-scale war

Publication date: December 22, 2022

Author: Halyna Kolesnyk, communications manager of the Legal Development Network 

At the end of November, Legal Development Network (LDN) experts Anna Karpenko and Inna Kolesnyk held a webinar for more than 30 representatives of small and medium-sized businesses on receiving and taxing grants. The day before, they received more than 150 questions and answered the most common ones.

Experts emphasize that many entrepreneurs are afraid to deal with state grants because they believe that it is risky. However, if you study the issue in detail, and understand the main points, then this source of funding can help a lot to fight the challenges of a full-scale war.

Below are some important tips from the experts.

Receiving grants

– All issues related to receiving grants are set out in Resolution No. 738 dated 21.06.2022, – says Inna Kolesnyk, lawyer and trainer of “Triangle” NGO, which provides free legal assistance within the framework of the social initiative “Vulyk Zmistiv” (Beehive of Meanings.

The expert advises involving an accountant and a lawyer who work in the organization in writing the grant application in order to write out all the indicators in as much detail and realistically as possible.

State grants can be received through Diia Business (https://business.diia.gov.ua/) and eRobota (https://erobota.diia.gov.ua/).

Today, the following types of state grant programs are active

• Your business. A micro-grant of up to UAH 250,000, which provides for the creation of at least one workplace (salaried employee).
• New level. Up to UAH 8 million and up to 25 jobs
• Your garden. Up to UAH 400,000 per hectare. 1-6 permanent places and up to 425 seasonal places. The grant application requires maximum detail, to which, in particular, a plan for planting agricultural crops is attached.
• Your greenhouse. Up to UAH 7 million. From 40 workplaces

Under development

• IT startup. Up to UAH 35 million
• Start-up in IT for training.

How are applications assessed?

Inna Kolesnyk explains how grant applications are considered.

Applications from grantors are first checked by Oschadbank, which has access to state registers, for example, executive proceedings, and tax registers. The business plan, solvency, and reality of the entrepreneur’s activity are studied. In addition, if necessary, the grantee may be called for an interview.

According to the resolution, there are points by which the application is evaluated. The next step is a referral to the employment center, which makes the final decision on granting the grant.

So, what should you pay attention to when preparing an application?

1. Compliance with the criteria of the resolution
2. Clarity, the reasonableness of the business plan, its compliance with the terms of the grant
3. Good business reputation of the entrepreneur, for example, no credit debts, timely payment of taxes, alimony, etc.
4. Adherence to deadlines, agreements regarding meetings, and interviews with the employees of Oschadbank and the regional employment center.
5. Compliance of documents with the norms of the Law of Ukraine, etc.

A separate source of business support is lending with a zero or low-interest rate – at 5%, 7%, or 9%.

“First of all, it is necessary to consider the types and conditions of credit products. What are they issued for and do they meet the needs of the business. To choose a loan or grant, we compare their objectives. We also pay attention to whether it is necessary to secure such loans. Very often, collateral is not required or is guaranteed by the state on a credit basis,” notes Inna Kolesnyk.

Grant taxation

A budget grant is targeted assistance in the form of funds or property provided free of charge and non-refundable at the expense of state and/or local budgets, and international technical assistance for project implementation.

LDN expert Anna Karpenko also talks about the specifics of grant taxation on ldn.org.ua  

The expert warns against the misuse of grant funds.

– Firstly, this entails an additional tax burden, as it will be necessary to charge them 18% income tax. Secondly, this may be a violation of receiving grant funds, and, accordingly, the provided funds may be withdrawn. They will need to be returned. And accordingly, it will be necessary to calculate income and pay tax to the budget on the amount spent.

At the same time, if, for example, the funds from the budget or international grant were spent for the intended purpose, it is not taxed – neither by income tax nor by a single tax, – emphasizes Anna Karpenko.

As a reminder, since the beginning of the full-scale war, the Legal Development Network has started advising small and medium-sized businesses (SMEs) on finance and taxation issues, and later on legal issues regarding relocation. More than 70 representatives of SMEs received consultations. 25 materials have been prepared for the most frequently asked questions, in particular on issues of taxation of state grants. In addition, the Legal Development Network conducted a survey among representatives of small and medium-sized businesses “Taxes and relocation for small and medium-sized businesses in the conditions of a full-scale war in Ukraine”, in which 15 respondents took part. Some of the proposed expert recommendations have already been implemented. 

You can get consultation for small and medium-sized businesses on legal and tax issues:

• by phone 096-032-35-38,
• by writing to the email: bizconsult@ldn.org.ua

The consultant is on call from 11:00 a.m. to 1:00 p.m., Monday – Friday.

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