Post-war reconstruction tax may replace 5% military levy in Ukraine – IMF memo
Post-war recovery will require significant resources, so the Ukrainian government is considering various options for preserving budget revenues after the cessation of the 5% military tax on personal income, which will remain levied for three years after martial law is lifted, according to the updated Memorandum of Understanding with the International Monetary Fund on the Extended Fund Facility (EFF).
"Following extension of the 5 percent Military Tax rate for three years after the end of Martial Law, we will ensure that revenues do not fall after this measure lapses. One option that we are considering is introducing a Reconstruction Tax to replace the Military Tax, which we would include in legislation that governs the transition from martial law," reads the memorandum.
For its part, the IMF welcomed such plans. The Fund noted that over the longer term, the authorities remain committed to achieving primary fiscal surpluses in the range of 0.2–0.4 percent of GDP to contribute to restoring debt sustainability.
"Delivering this fiscal path will require the authorities to continue to implement domestic revenue mobilization measures to ensure stable tax revenues over the medium term. In particular, the authorities will likely need to proactively address the sunset clause of the 5 percent Military Tax rate (a surcharge on Personal Income Tax) which, under legislation passed in April, is set to lapse three years after the end of Martial Law," the IMF said.
The fund said that the authorities are considering options, including replacing it with a reconstruction tax to be calibrated in transitional legislation when the war ends.
"On the expenditures side, spending will need to evolve in line with normalizing defense outlays and measured allocations for recovery, reconstruction, and other priorities. Doing so will help ensure that expenditure plans are aligned with restoring fiscal and debt sustainability, as well as the availability of financing on appropriate terms," the IMF said.
As reported by the State Tax Service, in January-June 2026, the state budget received UAH 94.2 billion in military tax, an increase of UAH 19.2 billion, or 25.6%, compared to the same period last year.
The military tax rate for individuals was increased from 1.5% to 5%, effective December 1, 2024.