Bill on reforming simplified taxation system shall be submitted to Rada by Dec 2026 – agreement with EU

A bill on measures to reform the preferential taxation regime, expected to secure additional revenues of at least UAH 70 billion annually, shall be submitted to the Verkhovna Rada as a condition for Ukraine to receive the third disbursement of macro-financial assistance under the EU’s Ukraine Support Loan in the amount of about EUR 1.45 billion.

As noted in the loan agreement and memorandum on macro-financial assistance ratified by the Verkhovna Rada on Thursday, the measures specifically concern countering tax evasion aimed at preventing artificial business splitting to qualify for preferential taxation regimes.

Other measures include restrictions on repeated transitions of business entities back to the simplified taxation system after moving to the general system, as well as the introduction of differentiated tax rates for third‑group payers depending on the type of economic activity.

Another condition for the third tranche is the adoption by the Verkhovna Rada of a law simplifying VAT administration for individual entrepreneurs – quarterly reporting instead of monthly, monthly tax invoices instead of daily ones, preparation of preliminary tax declarations for individual entrepreneurs, and simplification of procedures for unblocking tax invoices.

Parliament must also adopt amendments to legislation aimed at aligning Ukraine’s corporate taxation system with Article 4 of the EU Anti-Tax Avoidance Directive.

Among other conditions for the third tranche is preparation, in cooperation with the World Bank, IMF, and European Commission services, of a report with long-term forecasts of pension expenditure based on the current system and parameters of the planned pension reform.

In addition, Ukraine must develop and present to the European Commission a new Public Procurement Strategy for 2027–2030, as well as prepare a concept note for the law on defense procurement, to be drafted in 2027, aimed at aligning Ukraine’s legislative framework with the EU acquis.

The memorandum also provides for the creation by December of this year of 10 new audit committees at key budget spending authorities, including the ministries of internal affairs, energy, and digital transformation; Kyiv, Lviv, and Chernivtsi regional state administrations; the State Agency for Restoration and Infrastructure Development; the State Property Fund; the National Securities and Stock Market Commission; and the National Commission for State Regulation of Energy and Utilities. In addition, the Ministry of Finance must revise the national internal audit standard to bring it into line with global internal audit standards.

Finally, the Verkhovna Rada shall adopt a new Customs Code of Ukraine in line with the EU Customs Code (Regulation (EU) No. 952/2013), while relevant authorities must approve technical requirements for national customs IT systems ensuring the processing of customs declarations (AES, CCI/NIS), as well as for a risk management system compatible with ICS2, to enable integration with EU IT systems.

As reported, the EU’s Ukraine Support Loan provides for EUR 90 billion in 2027–2028, of which EUR 60 billion is for defense support and EUR 30 billion for budgetary support. This year, Ukraine expects to receive EUR 28.3 billion for arms procurement and EUR 16.7 billion in budgetary support, half of which is tied to fulfillment of Ukraine Facility conditions, and the other half to fulfillment of the macro-financial assistance conditions described above. The latter is expected to be disbursed in three tranches: EUR 3.2 billion, EUR 3.7 billion, and EUR 1.45 billion.

As reported, the issue of introducing VAT for individual entrepreneurs with annual income exceeding UAH 4 million is also a structural benchmark of the new IMF financing program. The Ukrainian side insists that introducing this provision during wartime is counterproductive and is working to postpone its implementation by one year – until 2027. Finance Minister Serhiy Marchenko, speaking at a meeting of the parliamentary temporary investigative commission, confirmed that the issue of introducing VAT for individual entrepreneurs may be deferred based on the results of the mission that began in Kyiv on May 27 to conduct the first review of the Extended Fund Facility (EFF) program.