Donation Agreements in Russia: Legal Risks and Tax Rules

 

Anna Ivanova, Associate at BRACE Law Firm

January 29, 2025

 

According to a 2024 study conducted by the Ministry of Economic Development, the Public Opinion Foundation, and Sber ("PRIM"), "today in Russia, 86% of entrepreneurs participate in solving social problems: they cooperate with volunteer and charitable organizations". [1] By many measures, the share of large organizations participating in charitable projects is increasing.

For example, in the healthcare and pharmaceutical sectors, a significant portion of pharmaceutical companies and medical device circulation entities provide charitable assistance in the form of donations of medicinal products, repairs to treatment facilities, assistance in implementing sports projects, and more.

At the same time, companies making donations encounter a fairly large number of legal issues that require special attention to avoid potential legal risks. This article examines the fundamental issues businesses face when making donations.

What Is a Donation?

In accordance with Article 585 of the Civil Code, a donation is a gift of a thing or a right for generally useful purposes. Donations may be made to individuals, medical and educational organizations, social service organizations and other similar organizations, charitable and scientific organizations, foundations, museums and other cultural institutions, public and religious organizations, other non-profit organizations in accordance with the law, as well as to the state and other subjects of civil law.

Thus, a donation is a type of gift. However, as expressly provided by Part 6 of Article 582 of the Civil Code, the provisions of the Civil Code on the revocation of a gift (Article 578 of the Civil Code) and on succession regarding a promise of a gift (Article 581 of the Civil Code) do not apply to donations. Other provisions of the Civil Code on gifts apply to donations unless otherwise provided by the donation agreement.

Charitable activity is defined as voluntary activity by individuals and legal entities for the selfless (gratuitous or on preferential terms) transfer of property to individuals or legal entities, including funds, the selfless performance of work, the provision of services, or other support[2].

Paragraphs 2 and 3 of Article 5 of Federal Law No. 135-FZ dated August 11, 1995, On Charitable Activity and Volunteering (the "Law on Charitable Activity and Volunteering") use the term "charitable donation" when defining "philanthropists." Philanthropists are defined as persons providing charitable donations in the following forms:

• the selfless (gratuitous or on preferential terms) transfer of property into ownership, including funds and/or intellectual property;
• the selfless (gratuitous or on preferential terms) granting of rights of possession, use, and disposal of any objects of ownership;
• the selfless (gratuitous or on preferential terms) performance of work or provision of services.

Philanthropists have the right to determine the purposes and procedure for using their donations.

Thus, the term "charitable donation" differs from the term "donation" used in the Civil Code in that it implies the possibility of not only selfless donations but also donations on preferential terms, whereas a donation, as a subtype of a gift, implies exclusively selfless assistance. As noted by the Prosecutor’s Office of the Republic of Tatarstan: "Charity should not be confused with a donation. A donation implies exclusively a gift, while assistance within the framework of charity may not be gratuitous"[3].

Furthermore, judicial practice notes that "unlike a gift, a donation is recognized as a gift of a thing or a right for generally useful purposes (Article 582 of the Civil Code). That is, the purpose of using the donation cannot be just anything; it must be generally useful and not only of a charitable nature. The use of a thing or right transferred as a result of a donation is strictly limited to the purposes designated upon the transfer of the donation".[4]

Consequently, the hallmark of a donation is its use for generally useful purposes. However, the law does not contain a definition of a "generally useful purpose."

For example, in one case considered in judicial practice, a donation agreement included a clause stating that the donor had the right to demand the return of funds if they were used in violation of the agreement's terms. In fact, the recipient spent the funds on constructing a motel to host events, which the donor argued did not correspond to generally useful purposes. The court examined the organization's charter, according to which the organization pursues generally useful goals aimed at the upbringing and development of the creative activity of youth in cultural and social life, and for these purposes, the organization organizes and conducts cultural and entertainment events, conferences, and rallies. The court denied the claim for the return of funds because the donor did not specify a particular purpose for the donated property in the agreement but transferred the funds for the performance of chartered activities. [5]

Thus, given the lack of a statutory definition for "generally useful purpose," the agreement must clearly formulate the purposes of the donation in alignment with the recipient's charter.

The following legal features of a donation can be identified:

• gratuitousness;
• focus on generally useful purposes;
• addressing to public, religious, and other non-profit organizations;
• conditionality of using the donation for a specific purpose;
• separate accounting for donations.

Who Is Entitled to Accept Donations?

According to Paragraph 1 of Article 582 of the Civil Code, donations may be made to individuals, medical and educational organizations, social service organizations and other similar organizations, charitable and scientific organizations, foundations, museums and other cultural institutions, public and religious organizations, other non-profit organizations in accordance with the law, as well as to the state and other subjects of civil law specified in Article 124 of the Civil Code. As we can see, the list of donation beneficiaries is quite broad; therefore, let us examine it in more detail.

Donations may be accepted by non-profit organizations. According to Part 2 of Article 2 and Paragraph 3 of Part 3 of Article 14 of Federal Law No. 7-FZ dated January 12, 1996, On Non-Profit Organizations, non-profit organizations are created to achieve social, charitable, cultural, educational, scientific, and management goals, to protect the health of citizens, as well as for other purposes aimed at achieving public goods. In this regard, a generally useful purpose may be understood as the use of property for the purposes of the donation recipient's activities as fixed in the charter of the relevant non-profit organization.

Another distinguishing feature of a donation is that a donation of property to an individual must be — and to legal entities may be — conditioned by the donor on the use of this property for a specific purpose. In the absence of such a condition, a donation of property to an individual is considered an ordinary gift, and in other cases, the donated property is used by the donee in accordance with the property's purpose.

Thus, to ensure that a donation to an individual is not reclassified as an ordinary gift, it is important to execute an agreement with the recipient specifying the purpose of the transferred donation.

In turn, a donation also differs from sponsorship, as sponsorship implies the existence of reciprocal consideration in the form of advertising services for the sponsor (mention of the sponsor). A donation must not be accompanied by advertising, as this contradicts the provisions of Article 582 of the Civil Code regarding the purposes of a donation.

At the same time, a number of subjects of legal relations have restrictions on accepting donations.

For example, according to Article 31 of Federal Law No. 82-FZ dated May 19, 1995, On Public Associations, the property of a public association is formed on the basis of:

• entrance and membership fees, if their payment is provided for by the charter;
• voluntary contributions and donations, and proceeds from lectures, exhibitions, lotteries, auctions, sports, and other events conducted in accordance with the charter of the public association;
• income from entrepreneurial activity, civil law transactions, and foreign trade;
• other proceeds not prohibited by law.

However, public associations whose charters provide for participation in elections and referendums in the manner established by the legislation of the Russian Federation may accept donations in the form of funds and other property for activities related to the preparation and conduct of elections only in the manner provided for by the Federal Law On Political Parties and the legislation of the Russian Federation on elections. Specifically, in accordance with Article 30 of Federal Law No. 95-FZ dated July 11, 2001, On Political Parties, a political party and its regional branches are entitled to accept donations in the form of funds and other property from individuals and legal entities, provided that these donations are documented and their source is specified, with mandatory non-cash transfer. Donations from individuals in the form of cash are permitted, but the total amount of such donations per year from one individual must not exceed 4,330 rubles.

In accordance with Article 3 of Federal Law No. 215-FZ dated December 30, 2004, On Housing Savings Cooperatives, the property of a cooperative is formed through share and other contributions of cooperative members, income received by the cooperative from its entrepreneurial activity that serves the achievement of the purposes for which the cooperative was created and corresponds to these purposes, voluntary donations, and other sources not prohibited by law.

A number of state authorities establish procedures for accepting donations with specific restrictions. For example, Paragraph 5 of the Methodological Recommendations for the Acceptance of Charitable Donations by the Federal Penitentiary Service (FSIN) of Russia, approved by FSIN Russia Order No. 188-r dated September 30, 2014, states that the basis for considering the acceptance of charitable donations is a written application addressed to the head of the correctional system institution, specifying the form of the donation, its name, quantity, price, and designated purpose. It is prohibited to accept charitable donations transferred for specific suspects, accused persons, or convicts.

Certain restrictions on the receipt and use of donations are also established for charitable organizations. We recall that charitable organizations are created in the forms of public organizations (associations), foundations, institutions, and other forms.

Unless otherwise established by the philanthropist or a charitable program, at least 80 percent of a charitable donation in monetary form must be used for charitable purposes within one year from the moment the charitable organization receives the donation. Charitable donations in kind are directed toward charitable purposes within one year of their receipt, unless otherwise established by the philanthropist or a charitable program.

Thus, a charitable organization uses its property, including funds, in accordance with its chartered purposes and to meet its needs arising from the organization's chartered activities, taking into account the specified conditions for the distribution of property.[6]

Therefore, in addition to the compliance of the accepted donation with the chartered activities of the recipient, it is necessary to observe the restrictions established by law regarding the beneficiary.

Who Is Entitled to Donate Property?

The Civil Code does not contain a list of persons who have the right to make a donation, nor is there a direct prohibition for any person to make donations, including a lack of direct prohibition regarding state or municipal authorities. However, this does not mean that none exist. A number of federal laws restrict the circle of donors in certain cases and prohibit donations.

For example, Paragraph 6 of Article 58 (Federal Law No. 67-FZ dated June 12, 2002, On Fundamental Guarantees of Electoral Rights and the Right to Participate in Referendums of Citizens of the Russian Federation) defines the circle of subjects prohibited from making donations to the election funds of candidates. Such persons include foreign states and organizations, foreign citizens, stateless persons, minors, Russian legal entities with foreign participation if the share (contribution) of foreign participation in their authorized (share) capital exceeds 30% on the day the election is called or the referendum campaign begins, state authorities, other state bodies, local self-government bodies, state and municipal institutions, state and municipal unitary enterprises, charitable and religious organizations, anonymous donors, etc.

In judicial practice, if an anonymous donation is made, the court will not find a violation if the donation was returned. [7]

One can also consider a situation where a creditor-potential bankrupt attempts to re-register its property through a donation (an example of this is provided later in this article). At the same time, as noted by lawyers, a creditor is not entitled to prohibit a debtor from donating property to charity; a creditor generally cannot control the daily business activities of the debtor or constantly changing financial indicators. Thus, banks cannot prohibit or place under control the charitable activities of borrowers under loan agreements. Therefore, banks can protect themselves only through traditional means: thorough verification of the borrower's financial position, issuing a loan for specific purposes, monitoring the expenditure of funds, and increasing collateral requirements (which are often already inflated). These methods provide limited protection: they do not prevent a debtor from siphoning off property that is outside the bank's control. [8]

Based on the foregoing, it can be concluded that the restrictions provided by current legislation for making donations are related to the need to eliminate corrupt components of donations and to exclude potential abuse of rights.

Separate Accounting of Donations

It is important to note that for the donation recipient, separate accounting of the donation is mandatory. As noted by the Federal Tax Service (FTS) of Russia: "To recognize received funds and/or other property as targeted proceeds, it is necessary that such proceeds be made for the maintenance of non-profit organizations and the conduct of their chartered non-profit activities gratuitously. The use of donations in commercial activities is inconsistent with the provisions of Article 582 of the Civil Code". [9]

If, due to a change in circumstances, it becomes impossible to use the donated property in accordance with the purpose specified by the donor, it may be used for another purpose only with the donor's consent, or in the event of the death of an individual donor or the liquidation of a legal entity donor, by a court decision, unless a different procedure is established by law (Paragraph 4 of Article 582 of the Civil Code). [10]

For instance, a court satisfied the claims of a charitable foundation against an individual who received a corresponding donation from the foundation because the charitable foundation fully performed its obligation under the agreement and transferred the funds to the individual. However, the donation recipient failed to provide a report with supporting documents regarding the expenditure of the donation. The court established that the donation amount was only partially used by the recipient. In this regard, it ordered the return of the funds not used for their designated purpose to the donor (the charitable foundation). [11]

In current legislation, there are cases where donation agreements were challenged within bankruptcy proceedings. However, in such cases, it must be proven that the donation recipient was aware that the transaction was entered into for the purpose of reducing the bankruptcy estate. As noted by the Supreme Court of the Russian Federation, a donation does not imply reciprocal consideration; if more than a year has passed since the conclusion of the agreement, the transaction may be checked for compliance with the requirements of Paragraph 2 of Article 61.2 of the Law on Bankruptcy. Accordingly, to annul a transaction, it must be established not only that the transaction was entered into with the intent to harm the property rights of the debtor's creditors and that such harm was caused, but also that the other party to the transaction knew or should have known of this intent at the time of the transaction. Paragraph 2 of Article 61.2 of the Law on Bankruptcy establishes presumptions of the counterparty's awareness that the transaction (operation) was performed with the intent to cause harm. However, in the case under consideration, the court proceeded from the fact that even if a bankrupt company decided to transfer funds to a charitable foundation for generally useful purposes solely to harm its creditors, the lower courts' conclusion regarding the charitable foundation's awareness could not be recognized as correct. This is because, in the normal course of business, resolving the issue of whether a charitable foundation can accept a donation cannot be conditioned on imposing an obligation on the foundation to verify the donor's financial position. [12]

However, it is important to note that every case of challenging transactions, including donations, in bankruptcy cases is subject to individual evaluation. A number of specialists suggest that the Supreme Court of the Russian Federation may soon adjust this position if the problem of using donations to defraud creditors is encountered frequently enough. [13]

In this regard, donation recipients must maintain separate accounting for the funds received, as well as reporting on their targeted use.

Can a Donor Revoke a Donation?

The question arises as to whether a donation recipient can refuse it, or conversely, whether a donor has the right to withdraw their donation.

According to Article 573 of the Civil Code, a donee is entitled to refuse a gift at any time before it is transferred. In this case, the gift agreement is considered terminated. If the gift agreement was concluded in writing, the refusal of the gift must also be made in writing. Furthermore, if the gift agreement was concluded in writing, the donor is entitled to demand compensation from the donee for actual damage caused by the refusal to accept the gift.

From the analogy of this legal rule, it follows that a donation recipient is entitled to refuse it. However, it is important that the refusal be based on objective reasons. Some authors provide examples of refusing a donation due to excessive complexities in documentation. Such complexities often arise with donations to government authorities. For example, a letter from the Ministry of Internal Affairs (MVD) of Russia dated August 12, 2013, No. 1/7521, and the Federal Agency for State Property Management dated March 27, 2013, No. OD-06/1306, On the Procedure for Transferring Movable Property to Units of the MVD of Russia System, regulates the procedure for transferring donated property into federal ownership. One of the documents required is an inventory card for each object of transferred property. At the same time, as noted by lawyers, the preparation of an inventory card for each object of movable property is not mandatory for a civil law transaction but is required exclusively for accounting. Excessive requirements can create a situation where a donation recipient refuses a donation agreement for property that is necessary for the fulfillment of set goals and tasks. [14]

In addition, Article 582 of the Civil Code establishes the donor's right to demand the revocation of a donation only if the use of the donated property is carried out in violation of the purpose specified by the donor. Thus, once a donor has made a donation, to revoke it, one must prove that the donation is being used in violation of its purpose. In such cases, it is important to specify such a purpose in the donation agreement.

In addition to these features, there are specific aspects of donations depending on the donor's business profile. Next, we will examine the specifics of donations from pharmaceutical companies.

Donations from Pharmaceutical Companies and Medical Device Circulation Entities

As noted within the framework of events conducted by pharmaceutical organizations for the exchange of experience among the professional community, "cooperation between pharmaceutical companies and charitable foundations can become a tool that leads to qualitative changes in the domestic healthcare system". [15]

Donations by pharmaceutical companies have a number of restrictions that must be taken into account when concluding a donation agreement.

First, gifts between commercial organizations are prohibited; therefore, a commercial organization cannot be the beneficiary of a donation.

According to Subparagraph 4 of Paragraph 1 of Article 575 of the Civil Code, gifts between commercial organizations are prohibited, with the exception of ordinary gifts whose value does not exceed 3,000 rubles. In this regard, a donation, as a subtype of a gift, will not be legal if it is made to a commercial organization.

It is important to note that when commercial companies interact, the forgiveness of a debt is not prohibited, although it can sometimes be qualified as a gift due to its gratuitous nature.

As noted in Paragraph 31 of Resolution of the Plenum of the Supreme Court of the Russian Federation No. 6 dated June 11, 2020, debt forgiveness does not indicate the conclusion of a gift agreement if it is performed by the creditor in the absence of an intent to gift the debtor. The absence of such intent may be evidenced, in particular, by the relationship between the debt forgiveness and the creditor's receipt of property benefit under any obligation (e.g., recognition of the debt, deferral of payment on another obligation, pre-trial repayment of a disputed debt in the unforgiven part, etc.), the creditor's achievement of another economic interest not directly related to the debt forgiveness, etc. [16]

The prohibition on gifts between commercial organizations is established, among other things, to comply with anti-corruption standards. As noted by the Ministry of Labor of Russia, to comply with anti-corruption measures, organizations are recommended to provide answers to a number of key questions:

• What is considered a gift? Will anti-corruption standards apply only to material values or also to the provision of various services: payment for travel, restaurant meals, hotel stays, etc.?
• Which gifts will be permitted?

Experience shows that preventing the receipt of gifts is an impractical measure in some cases, as low-value gifts are minimally likely to be used as corrupt payments; it is also important to consider special customs of hospitality and expressions of gratitude that involve giving gifts.

In this regard, the Ministry of Labor of Russia suggests establishing anti-corruption standards in organizations in the following aspects:

• the receipt of gifts from certain categories of donors (e.g., competitors, suppliers, organizations that are parties to litigation with the employer);
• the value of the gift received (both as a one-time gift and as the total value of gifts received from one donor over a certain period, for example, a year).[17]

Second, the law separately prohibits pharmaceutical companies from giving gifts to medical and pharmaceutical workers and heads of medical organizations.

In accordance with Article 74 of Federal Law No. 323-FZ dated November 21, 2011, On the Fundamentals of Health Protection of Citizens in the Russian Federation (the "Law on the Fundamentals of Health Protection of Citizens"), "medical workers and heads of medical organizations are not entitled to accept gifts or funds from organizations engaged in the development, production, and/or sale of medicinal products or medical devices, organizations holding rights to the use of a trade name of a medicinal product, organizations engaged in the wholesale trade of medicines, or pharmacy organizations (with the exception of rewards under agreements when conducting clinical trials of medicinal products or clinical trials of medical devices, or rewards related to the performance of pedagogical and/or scientific activities by a medical worker), including payment for entertainment, recreation, or travel to a vacation destination, or to participate in entertainment events conducted at the expense of companies or company representatives."

It should be noted that according to Article 575 of the Civil Code, gifts (with the exception of ordinary gifts not exceeding 3,000 rubles in value) to employees of medical organizations by citizens undergoing treatment in them are not permitted.

However, this prohibition applies to different relations than those covered by the aforementioned Article 74 of the Law on the Fundamentals of Health Protection of Citizens, as the donee under the Civil Code is an employee of a medical organization, and the donors are citizens undergoing treatment, or the spouses and relatives of these citizens. Consequently, the prohibition on accepting gifts from pharmaceutical companies and their representatives should be interpreted as the impossibility of receiving gifts, regardless of their value. [18]

However, it is important to understand that the above restriction does not exclude interaction between pharmaceutical companies and medical workers within scientific events — for example, conferences, forums, or webinars organized by a pharmaceutical company.

Furthermore, such a restriction does not prohibit making donations to medical organizations.

This is confirmed by the clarifications of the Ministry of Health of the Ulyanovsk Region: "A medical organization, as a legal entity, may receive on a gratuitous basis as a donation, for example, a batch of medicinal products (naturally, having certificates and a sufficient shelf life for further dispensing), if this will contribute to the achievement of the medical organization's chartered activities and if there is no corrupt interest on the part of the administration and employees of the medical organization."[19]

Third, medical workers and the head of a medical organization are prohibited from entering into agreements with a pharmaceutical company regarding the prescription or recommendation of medicinal products to patients.

Fourth, medical workers, pharmaceutical workers, and heads of medical and pharmacy organizations are prohibited from receiving samples of medicinal products and medical devices from pharmaceutical companies for distribution to patients/the public.

These restrictions are due to the impermissibility of unfair promotion of medicinal products by creating an interest among medical workers in prescribing or distributing a particular medicine among patients.

As noted by Roszdravnadzor, monitoring compliance with professional restrictions by medical and pharmaceutical workers contributes to providing patients with reliable and objective information about the medicinal products necessary for their treatment (regardless of their trade name and price category) and prevents the lobbying of the interests of specific manufacturers of medicinal products.[20]

Thus, it is permitted to make donations to a hospital. They must be addressed directly to the medical organization, not to its head or physicians.

Furthermore, the law does not contain a prohibition on donations to citizens if they are not medical or pharmaceutical workers, or heads of medical organizations or pharmacy institutions.

For example, donations of medicinal products and medical devices to hospitals are quite common.

In the case of such donations, it is important to pay attention to the recipient. The recipient may only be a non-profit organization.

In addition to the restrictions on donations in the pharmaceutical sphere, a large number of questions arise regarding the taxation of donations, the main ones of which are considered below.

What Taxes Must Be Paid on a Donation?

First, let us consider the specifics of taxation for the donation recipient.

As a general rule, a legal entity accepting a donation for which a specific purpose has been established must maintain separate accounting for all operations involving the use of the donated property (Article 585 of the Civil Code).

For example, the Ministry of Finance of Russia recommends defining the procedure for separate accounting of property received as a donation in the accounting policy and also points out that the receipt of a donation is recorded in accounting as a revenue operation.[21]

At the same time, according to Paragraph 2 of Article 251 of the Tax Code of the Russian Federation, targeted proceeds are not taken into account when determining the tax base for corporate income tax — specifically, targeted proceeds for the maintenance of non-profit organizations and the conduct of their chartered activities received gratuitously from organizations and/or individuals, as well as on the basis of decisions of state and local government authorities and decisions of the management bodies of state extra-budgetary funds, and used by the specified recipients for their intended purpose. At the same time, taxpayers who are recipients of the specified targeted proceeds are required to maintain separate accounting of income (expenses) received (incurred) within the framework of targeted proceeds.

As explained by the Ministry of Finance of Russia, such targeted proceeds include, among others, donations recognized as such in accordance with civil legislation.

In turn, income in the form of property (including funds), work, or services received within the framework of charitable activity (including in the form of charitable assistance or donations) that is not used for its targeted purpose is recognized as non-operating income and is taken into account when determining the tax base for corporate income tax (Paragraph 14 of Article 250 of the Tax Code). [22]

Thus, if donations received for the maintenance of non-profit organizations and the conduct of their chartered activities meet the criteria established by Paragraph 2 of Article 251 of the Tax Code (use for the targeted purpose), and if the condition regarding separate accounting is observed, then the income in the form of said donations is not taken into account when determining the tax base for corporate income tax. [23]

It is important to note that when forming the tax base for income tax, donations can only be disregarded by non-profit organizations that received and use them for generally useful purposes coinciding with the organization's chartered purposes. The provisions of Paragraph 2 of Article 251 of the Tax Code do not apply to commercial organizations. [24]

Next, let us consider the specifics of taxation for the person providing the donation.

According to Paragraph 1 of Article 265 of the Tax Code, for income tax purposes, donations can be taken into account as expenses only in certain cases:

• expenses for the creation of social, engineering, utility, and transport infrastructure facilities transferred gratuitously into state or municipal ownership;
• expenses in the form of the value of property intended for use for the purposes of warning and preventing the spread of the new coronavirus infection;
• expenses in the form of the value of property (including funds) transferred gratuitously to the following non-profit organizations included in the register of socially oriented non-profit organizations, as well as to centralized religious organizations.

The limit for recognized expenses must not exceed 1% of revenue. In other cases, by virtue of Article 270 of the Tax Code, expenses for donations are not subject to accounting.

As noted by the Ministry of Finance of Russia, expenses in the form of the value of gratuitously transferred property (work, services, property rights) are not taken into account. [25]

Thus, the accounting of expenses for income tax is possible only in strictly defined cases (if the donation is made to socially oriented non-profit organizations or centralized religious organizations) with a limit of recognized expenses no higher than 1% of the company's revenue.

Consequently, expenses incurred by an organization within the framework of a transferred donation cannot reduce the tax base for income tax if they do not meet the specified requirements. At the same time, VAT is not subject to payment. [26]

In addition, the transfer of goods (performance of work, provision of services) or the transfer of property rights gratuitously within the framework of charitable activity is not subject to taxation (is exempt from taxation) for VAT due to the following. According to the first paragraph of Subparagraph 12 of Paragraph 3 of Article 149 of the Tax Code, the transfer of goods (performance of work, provision of services) or the transfer of property rights gratuitously within the framework of charitable activity in accordance with Federal Law No. 135-FZ dated August 11, 1995, On Charitable Activity and Volunteering, with the exception of excisable goods, is exempt from VAT.

Thus, the transfer of goods (except for excisable goods), the performance of work, or the provision of services on a gratuitous basis for charitable purposes is not subject to VAT.[27]

Furthermore, according to Paragraph 8.2 of Article 217 of the Tax Code, Personal Income Tax (PIT) is not withheld when charitable assistance is provided to an individual by a charitable organization. [28] In other cases, when donations are made to individuals by other organizations, PIT must be withheld.

Based on the foregoing, it can be concluded that the legislator has established some relaxations in the taxation of organizations making donations. However, to avoid potential abuse (e.g., intentional understatement of the tax base), the legislator has strictly limited the recipients of donations, established a requirement for separate accounting by such recipients of the donations received, and limited the amount of donations recognized as expenses.

How to Properly Document a Donation?

Taking into account the aforementioned features of making donations, the main recommendation for persons making a donation, as well as for donation recipients, is to document the donation in writing in the form of a donation agreement, considering the following conditions:

• designation of the donation recipient. It is important to ensure that the donation recipient is a non-profit organization;
• if the donor is a pharmaceutical company, it is necessary to ensure that the recipient — an individual — is not a medical or pharmaceutical worker, or a head of a medical or pharmacy organization;
• designation of the targeted purpose of the donation, specifying a generally useful goal;
• verification of the recipient's chartered activity profile (to ensure that the use of the donation for its purpose corresponds to the recipient's chartered activities);
• specification of the donation amount or the value of the donated property (for subsequent accounting for taxation purposes by both the donor and the recipient).

In addition to specifying the above conditions in the agreement, it is recommended to verify the business reputation of the counterparty, both the donor and the donation recipient.

Despite the fact that the types of activities performed by organizations accepting donations are initially implied to be generally useful, it is important to verify the purpose of the transferred property every time a donation agreement is concluded to comply with the condition of Paragraph 1 of Article 582 of the Civil Code regarding the transfer of property for generally useful purposes. Such a verification will help avoid risks of potential reclassification of the agreement.

In addition to fixing these conditions in the donation agreement, it is also important, if possible, to conduct preliminary negotiations with the donation recipient to assess all subsequent risks associated with its activities, particularly in terms of compliance with antimonopoly and tax law requirements.

In conclusion, it should be noted that a donation agreement is a complex construct depending on the legal status of the parties, the type of property donated, and its purpose. Preparing the agreement requires a detailed analysis of the procedure and conditions for the donation, as well as monitoring of tax risks.

___________________________

References

[1] In 2024, the amount of business donations to SONKOs may exceed 100 billion rubles. Ministry of Economic Development of the Russian Federation. Tatyana Ilyushnikova. June 28, 2024.

[2] Article 1 of Federal Law No. 135-FZ dated August 11, 1995, On Charitable Activity and Volunteering.

[3] What is a donation? Prosecutor’s Office of the Republic of Tatarstan. August 23, 2022.

[4] Decision of the Arbitration Court of the City of Moscow dated April 9, 2018, in case No. A40-181376/17-115-2850.

[5] Ruling of the Supreme Arbitration Court of the Russian Federation dated June 27, 2012, No. VAS-7712/12 in case No. A05-8805/2011.

[6] On the requirements of legislation for the activities of charitable organizations. Department of the Ministry of Justice of the Russian Federation for the Republic of Khakassia. May 23, 2025.

[7] Appellate Ruling of the Judicial Collegium for Administrative Cases of the Supreme Court of the Russian Federation dated September 23, 2016, No. 48-APG16-15.

[8] For good or for harm: donations by a debtor during a period of suspicion. Pleshanova O. // Legal Work in a Credit Organization. 2023. No. 4. P. 5.

[9] The Department provides clarifications on the procedure for accounting for donations used for other than targeted purposes. FAS Russia. December 17, 2015.

[10] Charity. Slesarev S.A. // SPS ConsultantPlus. January 17, 2025.

[11] Decision of the Partizansky District Court dated January 12, 2024, in case No. 2-123/2024.

[12] Review of the legal positions of the Supreme Court of the Russian Federation on private law issues for September 2023.

[13] Incontestable donations. Boreysho D. // Zakon.ru. October 23, 2023.

[14] Limits of restrictions on receiving donations from private entities by units of the MVD of Russia. Maksimov V.A. // Civilist. 2023. No. 2. P. 65.

[15] Dialogue between NGOs and the pharma business: developing collaboration patterns. GxP News. March 16, 2022.

[16] Resolution of the Plenum of the Supreme Court of the Russian Federation dated June 11, 2020, No. 6, On Certain Issues of Application of the Provisions of the Civil Code of the Russian Federation on the Termination of Obligations.

[17] Measures for the prevention of corruption in organizations approved by the Ministry of Labor of Russia. September 19, 2019.

[18] Commentary on the Law on the Fundamentals of Health Protection of Citizens in the Russian Federation. Grishaev S.P. April 20, 2012.

[19] Clarifications on Article 74 of Federal Law No. 323-FZ dated November 21, 2011, On the Fundamentals of Health Protection of Citizens in the Russian Federation. Ministry of Health of the Ulyanovsk Region. June 20, 2019.

[20] Order of Roszdravnadzor dated May 4, 2021, No. 3881, On Approval of the Departmental Program for the Prevention of Violations of Mandatory Requirements During the Performance of State Quality Control and Safety of Medical Activities, Federal State Supervision in the Sphere of Circulation of Medicines and State Control Over the Circulation of Medical Devices.

[21] Letter of the Ministry of Finance of Russia dated April 14, 2014, No. 02-06-10/17029.

[22] Letter of the Ministry of Finance of Russia No. 03-03-07/75167 dated August 12, 2024.

[23] Letter of the Ministry of Finance of Russia No. 03-03-06/3/71009 dated July 28, 2023.

[24] Letter of the Ministry of Finance of Russia No. 03-03-06/1/61847 dated August 30, 2018.

[25] Letter of the Ministry of Finance No. 03-07-07/61 dated October 20, 2011.

[26] Letter of the Ministry of Finance of Russia No. 07-01-09/16696 dated March 14, 2019.

[27] Letter of the Ministry of Finance of Russia No. 03-03-07/65327 dated July 27, 2020.

[28] Letter of the Ministry of Finance dated March 12, 2019, No. 03-04-05/15721.