The IMF is shaping a new tax and financial policy for Ukraine: what is important to know now

After the end of the war, the Ukrainian economy will need deep restructuring, not only because of the destroyed infrastructure or the loss of industrial clusters, but also because of the exhausted resources of the old tax system. What worked during the war will not be able to ensure sustainable economic growth after it ends. Therefore, already now, in parallel with the financing of current needs, international institutions are starting to prepare the ground for changes in fiscal policy. Among them is the International Monetary Fund, which within the framework of the EFF program for Ukraine has started work on a separate package of reforms for the post-war period.

It is not just about new rules for business, but about revising basic approaches to taxation: from carbon emissions to citizens’ incomes, from a simplified system to digital assets. And although the measures themselves are at the stage of development, it is already clear: the changes will be complex, gradual and will affect everyone — from an employee to an entrepreneur or investor in virtual assets. What exactly does the IMF propose to change and what consequences will it have for Ukrainians, business and the state budget?

What the updated Memorandum of the IMF envisages

The publication of the updated Memorandum on economic and financial policy between Ukraine and the International Monetary Fund put an end to the next stage of the evaluation of cooperation within the Extended Fund Facility (EFF) program. In addition, the Executive Board of the International Monetary Fund completed the seventh review of the program under the Enhanced Financing Facility for Ukraine EFF. This means that in the near future Ukraine will receive another tranche in the amount of approximately 400 million US dollars. Such a result of the review proves that despite the full-scale war, the country not only maintains macro-financial stability, but also continues to fulfill most of the conditions of the program.

The arrival of the next tranche — already the eighth under the program — will increase the total amount of funds received to more than 10.1 billion dollars from the planned 15.5 billion for 2023-2027. It is a continuous financial resource that enables the government to maintain solvency, close budget deficits, maintain social benefits and maintain currency stability.

However, while Ukraine remains at war, the International Monetary Fund, in parallel with the financial support of the state budget, has begun the development of a large-scale tax package for the future. It covers several directions of reforms, which, according to the IMF, should be implemented already in the post-war period. This is stated in the official report to the seventh review of the EFF Extended Funding Program, published on the fund’s website on March 28, 2025.

First of all, the IMF took on three components:
– creation of a modern carbon emissions taxation system;
– revision of the tax regime for extractive industries;
– determination of rules for taxation of virtual assets, harmonized with EU directives and standards of the OECD Global Forum on transparency and exchange of tax data.

The fund emphasizes that in the future Ukraine should move to a fairer model of taxation. This means the gradual introduction of a progressive personal income tax (PIT), i.e. an increase in rates for those who earn more. In addition, it is planned to completely revise the simplified taxation system (SSO), which currently allows tax evasion and legalization of shadow income under the guise of entrepreneurial activity. The IMF believes that the use of SSO by medium and large businesses is a particular problem, because thanks to this, it is possible to formally reduce the volume of sales of goods, including illegal imports or products without proper certification. The system itself, which was conceived for small businesses, actually became a tool for tax optimization for much larger players.

The document also notes that no later than the beginning of 2027, the IMF expects that Ukraine will limit the possibility of returning to the simplified system after the transition to the general one. That is, if the entrepreneur decided to work on the general system, then returning to the single tax will be almost impossible.

Another direction will be a review of the types of activities that can work on the SSO: some of them will be excluded. At the same time, a new approach to determining and regularly updating financial thresholds is planned, taking into account inflation and the real economic situation. It will also address the issue of confidentiality of tax data, which currently creates barriers to effective administration. What is more, the IMF clearly states that changes in rates or expansion of the tax base will not yield results without parallel reform of administrative mechanisms. It is, in particular, that the current system of administration, especially within the framework of simplified taxation, has serious limitations regarding the processing, protection and use of tax information.

The National Revenue Strategy (NRS) puts it bluntly: the reform of personal income tax (PIT) and value added tax (VAT) is impossible without changing the methods of administration, as well as without revising approaches to the confidentiality of tax data, especially within the simplified tax system. These changes will require the coordination of the Ministry of Finance and the NBU, and not only at the level of regulatory regulation, but also in the field of technical implementation: digital integration, automatic information exchange, integration with European data protection standards, in particular based on EU directives. The IMF emphasizes that these processes should take place with the involvement of technical assistance from international partners, including experts from the Fund. And this is not a one-time action, but a gradual renewal of the tax infrastructure, which should lay a long-term basis for the stable functioning of the fiscal system in the conditions of the digital economy.

At the same time, the IMF pays special attention to the issue of taxation of digital income. In cooperation with the EU and with the help of the DAC 7 directive, the fund supports the introduction of reporting for digital service platforms in Ukraine. This will allow the tax service to gain access to data on the income of individuals who receive income without registering a sole proprietorship or without declaring it at all. These are, for example, people who provide services through online platforms, trade or participate in digital financial transactions.

According to the IMF’s expectations, such an exchange of information, as well as changes in tax legislation, will allow to significantly expand the tax base and make the declaration of income more complete and reliable. According to the fund, this will be the first step towards the digital transformation of the tax system. Ukraine must submit relevant changes to the legislation to the parliament by the end of April 2025.

Therefore, the IMF Memorandum records not just intentions, but a complete fiscal vector: Ukraine should gradually move to a more transparent, progressive, digitally managed taxation system, which will be harmonized with European norms. But it must be done in such a way as not to lose a key resource in the process — the trust of citizens and businesses.

New deadlines and commitments in the IMF Memorandum

The updated Memorandum on Economic and Financial Policy between Ukraine and the International Monetary Fund opened a new phase — not only with updated deadlines, but also with additional structural commitments. The Ukrainian leadership must fulfill them within a fairly tight time frame, part of which falls already in the second half of 2025. The document clearly states: five structural conditions, which were to be fulfilled earlier, remained unfulfilled within the deadline. Another four were officially postponed. However, despite these delays, there are no signs of political mistrust or suspension of cooperation in the Memorandum. On the contrary, Ukraine receives a clear schedule of new structural “lighthouses”, which must be implemented in the second half of the year. This indicates a change in emphasis: instead of sanctioning pressure, there is a controlled adaptation to conditions in which it is really difficult to implement reforms, but it is no longer possible to postpone them.

The four new “beacons” enshrined in the document cover different areas — from financial supervision to state investment, and each of them has a separate meaning in the general logic of building the state’s institutional capacity. The first concerns the completion of an independent audit by the National Securities and Stock Market Commission (NSSCF) by the end of June. This is not only an internal audit of the regulator’s effectiveness, but also an important prerequisite for the development of the capital market in Ukraine. Without transparent control and capable supervision, the state will not be able to attract domestic and foreign investors in post-war reconstruction.

The second stage — until the end of August — involves changing approaches to the formation of supervisory boards of state-owned companies. It is not about a technical change of the format, but about a real review of the selection procedures, which should protect state assets from manual management and political interference. This is one of the demands not only of the IMF, but also of other donors who demand real depoliticization of corporate governance.

The third block – until September – is an operational plan for the implementation of the IT strategy of the Ministry of Finance in cooperation with the tax and customs authorities. The digitalization of public finance administration, which until recently remained declarative, now receives a specific institutional format and measurable goals. It is not only about digital tools for tax collection, but about synchronizing them with the National Revenue Strategy, which should form the basis of a new model of the tax system.

And finally, by the end of the year, sectoral strategies for public investment management should be adopted. This is not just a set of policies: Ukraine must for the first time offer a unified approach to project prioritization, capital expenditure efficiency and public accountability for their implementation. Such an approach is needed not only to reform budget management, but also to gain access to long-term financing in the post-war period.

The fact that the five previous structural conditions were not met by the deadline is not surprising. Most of them demanded the adoption of laws or government decisions in conditions of political and economic instability. Postponing four of them to July-September does not cancel their implementation, but provides more time for formal, and most importantly, meaningful content. This is, in fact, a sign of a realistic dialogue between the Ukrainian government and the IMF, which recognizes that reform pressure must maintain momentum, but must not ignore context. In other words, the Memorandum is not a list of “failures” – it is a step-by-step road map that gradually changes according to new circumstances. But the changes are not in the direction of softening the requirements, but on the contrary — in their detailing and strengthening.

Formally, these “beacons” are technical obligations, but in fact they are a test of trust and predictability of Ukrainian economic policy. All new structural conditions are tied to systemic financing not only from the IMF, but also from the EU, the World Bank and other partners. Implementation (or lack thereof) will be the basis for decisions on the allocation of subsequent tranches, debt restructuring, and subsequently for negotiations on long-term reconstruction.

Individual blocks, such as stock market inspection or corporate governance, directly affect Ukraine’s ability to attract investment and restore domestic markets. Others, such as the digital IT infrastructure of financial institutions, create the basis for a more transparent tax system.

What to expect FOPs, what should be known about pensions and utility tariffs

In December 2023, the Cabinet of Ministers of Ukraine approved the National Income Strategy for 2024–2030, a document that was one of the conditions for continued cooperation with the International Monetary Fund. Despite the restrained presentation, the strategy actually lays the foundation for a deep restructuring of the taxation system in Ukraine, especially as it pertains to small businesses. And although the reform is presented as phased and discussed, its individual details have already caused noticeable concern among entrepreneurs.

Among the key changes listed above, recorded in the document, is the unification of the second and third groups of FOPs into a single one. But unification is not the main point. The most striking thing is that the single tax will no longer be fixed. Instead, it is proposed to introduce a flexible scale in which the rate will depend on the type of activity. For trade, the rate will remain relatively low at 3%, but for a number of services it will gradually increase up to 17%. As a result, this means that some entrepreneurs will pay several times more than now, without even changing the specifics of their activities. This is especially true of the third group of sole proprietorships — in particular, those who actually run a small business in the field of service provision through legal entities. For them, the tax burden may increase from the current 5% up to 18%. Moreover, it is not only about the rate: in the strategic documents, the idea of ​​gradually withdrawing legal entities from the simplified tax regime appears, which, in fact, can be considered a preparation for the curtailment of the preferential regime for this segment.

It should be noted that the information about possible innovations, made public in March together with the interim report of the Ministry of Finance on the implementation of the strategy, caused a wave of criticism in the business environment because it is not about improvement, but the elimination of simplified taxation as a phenomenon. Those who conduct business in creative industries, online services and educational projects reacted especially sharply. After the concerns became public, the Ministry of Finance issued a statement that there would be no tax increase in the near future, and that the reform would be introduced only after a wide public discussion and passage of bills through the Verkhovna Rada. However, even with this amendment, the key signals remained: the simplified system should change in the direction of greater control, higher rates and a reduction in the list of permitted activities.

In addition, representatives of the Ukrainian authorities, namely President of Ukraine Volodymyr Zelenskyi, Prime Minister Denys Shmyhal, Minister of Finance Serhiy Marchenko and Head of the National Bank of Ukraine Andriy Pishnyi, in their letter of intent to the IMF leadership, among other things, promise that they will change the simplified taxation system, and also confirmed their commitment to further reforms in the field of public finance, monetary and currency policy, state asset management, anti-corruption and energy. The key point here is not declarativeness, but adaptation of the course: some of the goals have been adjusted, but the basic direction has not changed.

Another principled position also appeared: the state wants to change the mode of access of tax authorities to bank information. It is about the possibility of extrajudicial access to information on the movement of funds in the accounts of individuals, especially those who receive income without registering a business or without switching to the official taxation system. This point is particularly important in the context of plans for the digital integration of data, which should take place within the broader tax reform — together with the NBU, with technical support from the IMF and European institutions.

Despite assurances of gradualism, the situation looks like preparation for a revision of the small business taxation model as a whole. Currently, none of the steps is finalized in the form of a law, but the general trend is obvious: from simplification as a preferential regime to simplification as a system with a full load and limited application. This decision is dictated by both internal factors (state budget deficit, desire for fiscal equality) and external factors (IMF requirements and desire to adapt to EU standards). But for small businesses, which in recent years have become a pillar of economic stability, this means a completely new reality.

At the same time, apart from taxation issues, despite repeated political statements about the need to introduce a accumulative pension system in Ukraine, this will not happen in the coming years. This is also clear from the updated IMF Memorandum. The document states that over the next few years, Ukraine plans to focus not on the introduction of new mechanisms, but on the development of a conceptual framework for improving and simplifying the current pension system. This process will take place with the support of the World Bank. The authorities plan to unify the approaches to the appointment of insurance pensions, which currently have a number of exceptions and inconsistencies, and will also study the possibilities of introducing the second level of the pension system — the accumulative one — but only when the appropriate conditions are created.

The government also undertakes to refrain from any decisions that may increase pension costs without a clearly defined source of their funding. In particular, it is about three important things:

1. The authorities do not plan to introduce new types of special pensions or preferential conditions for certain categories.
2. Legislation that creates additional obligations for the state in the pension sphere without adequate financial reserves will not be adopted.
3. Also, no changes are planned that could lower the retirement age or create new benefits that would lead to a reduction in the retirement age for certain groups.

According to the terms of the Memorandum, every potential change in pension legislation that will have fiscal consequences will have to be accompanied by a thorough medium-term financial analysis and an assessment of the impact on the sustainability of the public debt. In addition, in such cases, sources of funding for relevant expenses must be clearly laid down in the budget of the Pension Fund. So, we are not talking about abandoning the pension reform, but its postponement for an indefinite period with an emphasis on technical and legislative preparation. In the near term, the priority remains the stability and predictability of the current system, rather than risky innovations in conditions of limited resources.

It is also very important that among a number of reforms and commitments recorded in the recently published updated Memorandum between Ukraine and the International Monetary Fund, there is one block that directly affects every Ukrainian family – the gradual increase in tariffs for housing and communal services after the end of the war. The document clearly states: as soon as the situation allows, the government should resume the process of revising the tariff policy — in particular, in terms of electricity and natural gas for the population. It is not about a one-time increase in prices, but a gradual change in approaches that will reduce the subsidy burden on the budget and ensure the financial stability of key energy enterprises.

In wartime conditions, the government deliberately keeps tariffs at a stable level, compensating the difference between the market price and tariffs for the population at the expense of the state. But such a scheme works only as long as there is external financial support — from donors, the EU and international financial institutions. The Memorandum emphasizes that in the future financing of the energy sector should be transparent, direct subsidies should become less, and this is possible only if tariffs gradually approach an economically justified level. So far, the government has undertaken to provide direct budget support to energy companies — until the resource for tariff restructuring appears. This means that there will still be a certain transition period, but the very fact of such a commitment is a signal that maintaining the reduced tariffs will not be an indefinite policy.

It should be noted that the Memorandum does not directly indicate a specific date for tariff revision, however, the wording “as soon as conditions permit” clearly indicates an orientation towards the post-war stage. It is then, according to the logic of the authors of the document, that the active restoration of the infrastructure, the growth of the budget burden and the new phase of reforms will begin. On the one hand, this approach is a recognition that during hostilities, raising tariffs would be socially unacceptable. On the other hand, it is also a plan for the future recorded in an official document, which prepares both the international community and Ukrainian society for an inevitable change in the model. At the same time, the change in tariffs will not be sudden. All such processes involve public discussion, the adoption of appropriate decisions at the government level, changes in the regulatory framework and coordination with the regulator — the NKRECP. But the fact that it is written directly in the Memorandum clearly indicates that the revision of tariffs is no longer a hypothesis – it is only a matter of time and implementation mechanism.

Therefore, the Memorandum with the IMF is not just an agreement on another tranche. This is a road map of how Ukraine’s economy will change after the war, and these changes will affect everyone. In the coming years, Ukrainians can expect a review of tariffs, new approaches to small business taxation, a gradual reduction of preferential regimes, increased control over citizens’ incomes, and a reduction in state spending on social support.

These are not reforms for the sake of reforms, but a condition for the survival of the financial system. And although none of them will be implemented immediately, the direction of movement is already clearly defined. Ukraine will have to live in conditions of less state support, higher prices, greater tax transparency and burden. The memorandum, first of all, is a signal that the state will gradually transfer financial responsibility to citizens and businesses, and we should be ready for this now.