Ukraine’s two main financial backers, the EU and IMF, are reportedly tying further aid disbursements to specific tax reforms and fiscal adjustments.
Kiev, facing escalating battlefield pressures, has been urging for accelerated funding as it relies heavily on foreign support to address a widening budget shortfall and sustain its operations against Russia. However, most long-term financial assistance comes with stringent conditions.
The EU is now considering linking part of its €90 billion ($105 billion) loan package to business tax reforms. The bloc formally approved this long-contested, interest-free loan last week after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar. Brussels has pledged to begin disbursements in the second quarter of 2026.
According to reports, approximately €8.4 billion in macro-financial assistance—roughly 10% of this year’s total—could depend on reforming Ukraine’s preferential tax regime. Currently, some businesses pay a flat 5% tax on revenue instead of profit under the Simplified Taxation System, which donors claim drains state revenues and encourages shadow economic activity. The EU is now proposing that firms in this scheme pay a 20% value-added tax (VAT) once their turnover exceeds 4 million hryvnia (about $91,000).
A European Commission spokesperson told media the bloc is “working tirelessly” to finalize the memorandum outlining funding conditions but provided no further details or timeline.
Meanwhile, the IMF is pushing Ukraine to expand its tax base under its current $8.1 billion aid program. The fund also demands that Ukraine implement VAT on low-value imported parcels ahead of a key review in June. Currently, goods worth under €150 are exempt from VAT; removing this threshold could generate around 10 billion hryvnia ($227 million) annually, according to the Finance Ministry.
A draft law has been submitted to parliament but remains undeveloped due to insufficient support, media reports state. Prime Minister Yulia Sviridenko previously characterized these measures as “not constructive” and “highly sensitive,” highlighting growing domestic resistance to additional tax increases.
Analysts warn that failing to enact the required legislation could delay the IMF’s June review, jeopardizing upcoming disbursements from both the fund and related EU assistance. The EU and IMF closely coordinate their reform demands for Ukraine.
Russia has repeatedly warned that continued Western financial support will prolong the conflict while shifting the burden onto European taxpayers. Russian Security Council Secretary Sergey Shoigu recently stated that the EU package would further strain “ordinary Europeans,” labeling it “another step” toward a loss of sovereignty for European states.