The Ukrainian Parliament has approved a government bill to extend the existing military tax, which will remain in effect for three years following the end of martial law. The decision, made on April 7, received support from 257 members of the Verkhovna Rada.
The military tax is currently set at 5% for individuals, 10% for individual entrepreneurs in certain tax groups based on a minimum wage, and 1% for third-group entrepreneurs and legal entities, excluding e-residents. These provisions are intended to continue until the end of martial law and for three years thereafter.
This legislative initiative aligns with the requirements set by the International Monetary Fund (IMF) for Ukraine to secure financial assistance. The IMF has stipulated that the continuation of the military tax is essential for the disbursement of funds.
On April 6, the parliamentary committee on tax policy endorsed the bill, recommending that lawmakers adopt it. This step is part of a broader framework that includes a new four-year extended funding program agreed upon between Ukraine and the IMF, which is valued at $8.1 billion.
As part of this program, the Ukrainian government must fulfill 16 structural benchmarks and four mandatory prior actions. One of the proposed measures involved the mandatory VAT payment by individual entrepreneurs earning over 1 million UAH annually, although this faced backlash leading to a revised proposal that raised the threshold to between 2 million and 4 million UAH.
On February 14, Prime Minister Yulia Svyrydenko confirmed that the IMF had agreed to eliminate some prior conditions for the new credit program, including the introduction of VAT for entrepreneurs and other tax measures.
On February 27, the IMF approved the new extended funding program for Ukraine, which aims to address the budget deficit. Following this, on March 3, Ukraine received the first tranche of $1.5 billion under the new program.
However, on March 10, the Parliament failed to pass a bill concerning the taxation of income from digital platforms, which is another requirement for receiving macro-financial assistance. The ongoing legislative process is critical for Ukraine to maintain its financial support from international partners amid current economic challenges.
The Ukrainian Parliament has extended the military tax as part of a broader strategy to meet IMF funding conditions. This decision reflects ongoing efforts to stabilize the economy and secure international financial support.