Valdis Dombrovskis, the European Commissioner for Economy, announced on May 5 that tax reform is a critical component of ongoing negotiations regarding a €90 billion macro-financial assistance package for Ukraine. His remarks came during a press conference following a meeting of EU finance ministers in Brussels.
Dombrovskis noted that discussions with Ukrainian authorities are progressing, but specific details remain under wraps. He stated,
“We are at a very advanced stage of negotiations with the Ukrainian authorities regarding the conditions that will underpin our macro-financial assistance program. I cannot go into specifics at this moment, but mobilizing domestic revenues is a vital part of these discussions, as is tax reform. However, the exact mechanisms and elements are still being debated.”
The European Commission is currently finalizing a memorandum of understanding with Ukraine that will outline the terms of funding. Once this document is signed, it will enable the initial disbursements under the macro-financial assistance program. Concurrently, Brussels is coordinating with the International Monetary Fund (IMF) to establish a credit agreement that should be in place before the first payments are made.
Of the total €90 billion loan, one-third is allocated for direct budget support contingent upon Ukraine implementing necessary reforms, while the remainder consists of defense assistance without additional conditions. The European Council approved the loan following Hungary’s removal of its veto, and technical documents are now being finalized.
Details on VAT Initiative for Entrepreneurs
In November 2025, Ukraine and the IMF agreed on the parameters of a new four-year extended funding program amounting to $8.1 billion. This program includes 16 structural benchmarks that the government and the Verkhovna Rada must fulfill, alongside four mandatory prior actions that must be completed before the program can commence.
In December 2025, the Ministry of Finance proposed a bill requiring individual entrepreneurs with annual incomes exceeding 1 million hryvnias to pay VAT. Following public backlash, the ministry began drafting a revised version that raises the threshold to between 2 and 4 million hryvnias annually.
On February 14, Prime Minister Yulia Svyrydenko informed reporters that the IMF had agreed to waive the prior actions for the new lending program, which included requirements related to VAT for entrepreneurs, customs duties on parcels, and taxes for digital platforms, while maintaining the military levy.
On February 27, the IMF approved a new extended funding program for Ukraine, designed to last four years and provide $8.1 billion to help cover the country’s budget deficit.
On March 3, Ukraine received the first tranche of $1.5 billion under this new program from the IMF’s Extended Fund Facility (EFF).
However, on March 10, the Verkhovna Rada rejected a bill concerning taxation of income from digital platforms, one of the program’s stipulations.
On April 19, Svyrydenko stated that the IMF was understanding of the sensitivities surrounding the VAT initiative for entrepreneurs. She indicated that the government and the IMF would work on alternative measures to ensure budget revenue for 2027.
The EU is negotiating a substantial financial aid package for Ukraine, with tax reform identified as a key condition. The discussions involve both direct budget support and defense assistance, while the IMF also plays a crucial role in shaping the funding framework.