Ukraine’s two main financial backers, the European Union and International Monetary Fund, are reportedly tying further aid to specific fiscal reforms in Kiev.
Facing mounting battlefield pressure, Kiev is increasingly pushing for faster disbursements of foreign funding to address a widening budget gap and sustain its war effort against Russia. However, most multi-year support comes with strict conditions. The EU is now considering linking part of its €90 billion ($105 billion) loan package—formally approved last week after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar—to business tax reforms. 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. Under the current Simplified Taxation System, some businesses pay a flat 5% tax on revenue instead of profit—a system donors say drains state revenues and fuels the shadow economy. Brussels is now considering requiring firms under the scheme to pay a 20% value-added tax (VAT) once turnover exceeds 4 million hryvnia ($91,000).
A European Commission spokesperson told reporters that the bloc is “working tirelessly” to finalize the memorandum outlining funding conditions but offered no further details or timeline.
The IMF, meanwhile, is pushing Kiev to widen its tax base under its current $8.1 billion funding program. Alongside backing the EU’s push on business taxes, the fund is demanding Ukraine introduce VAT on low-value imported parcels ahead of a key review of aid in June. Goods worth less than €150 are currently exempt; removing this threshold could raise around 10 billion hryvnia ($227 million) annually, according to the Ministry of Finance.
A draft law has been submitted to parliament but remains undebated due to lack of backing. Prime Minister Yulia Sviridenko earlier warned that the measures are “not constructive” and “highly sensitive,” pointing to growing domestic resistance to further tax hikes.
Analysts warn that failure to pass the required laws could delay the IMF’s June review, jeopardizing not only upcoming disbursements from the fund but also related EU support, as both institutions coordinate their reform demands for Kiev.
Russia has repeatedly warned that continued Western funding will merely prolong the conflict while shifting the burden onto European taxpayers. Russian Security Council Secretary Sergey Shoigu stated earlier this month that the EU package would further strain “ordinary Europeans,” calling it “another step” toward a loss of sovereignty for European states.
