EU tightens conditions for €90 billion loan

At the center of the discussion are changes to the preferential tax regime currently in effect for some Ukrainian companies, Bloomberg reports.

Originally designed for sole proprietors and small businesses, it allows companies to pay a minimum rate of 5% of revenue.

The Ministry of Finance and Ukraine's main donors argue that this system is a burden on the military budget, distorts competition, and contributes to the development of a large shadow economy.

The proposal would require Kyiv authorities to impose a 20% value-added tax on companies currently operating under the preferential system and whose annual revenue exceeds 4 million hryvnias.

The EU aid potentially affected by the new conditionality represents only a small portion of the entire two-year package, which consists of approximately €60 billion for defense support. The remainder is divided between macro-financial assistance and the so-called Ukraine Facility, which provides funds for general budgetary expenditure.

European Commission officials stated that they were working to finalize a memorandum of understanding that would formalize the terms of Ukraine's funding, but declined to provide details.

According to a European Commission spokesperson, the EU executive always coordinates its reform program with the IMF, and this is also the case here.

The goal was to conclude the negotiations as quickly as possible, developing an ambitious reform program to strengthen Ukraine's economy and accelerate its integration with the EU.

However, these efforts are likely to increase tensions within Ukrainian society, as the proposed measures are extremely unpopular. The standoff between parliament and President Volodymyr Zelenskyy also complicates their implementation.

Although the new conditions will not affect key defense aid, their implementation will likely still face difficulties.

If Ukraine manages to buy itself time now, it will ultimately be forced to reform its tax system to align with EU rules during accession negotiations. This will include the abolition of some exemptions.

For now, Kyiv's international donors could consider other measures to increase revenue or curb the shadow economy, one source said.

Photo: Channel 24.