Ukraine must adopt tax package, appoint new customs chief by April under IMF program

Ukraine must implement recommendations to strengthen the appointment process for supervisory boards of state-owned companies by the end of February, adopt a tax package for 2026-27 by the end of March and appoint a new permanent head of the State Customs Service — the three nearest structural benchmarks under the new Extended Fund Facility program with the International Monetary Fund.

According to Ukraine’s memorandum on economic and financial policy published by the IMF on its website Friday, there are 12 benchmarks total, including one continuing benchmark from the previous program: that any non-systemic banks transferred to state ownership will not be recapitalized with budget resources and will be handed over to the Deposit Guarantee Fund for resolution if they violate prudential requirements, as the National Bank recently did with PIN Bank and MotorBank.

Regarding tax changes, the memorandum states they involve eliminating tax breaks for imports via low-value postal packages and canceling VAT exemptions for simplified tax regimes by requiring mandatory VAT registration starting January 1, 2027, for simplified taxpayers whose turnover exceeds the general VAT registration threshold.

"We will abolish opportunities to abuse the Simplified Tax (ST) system for income tax avoidance… The threshold will be raised moderately but will not exceed UAH 4 million," the memorandum submitted by the Ukrainina side.

In addition to submitting to parliament a bill amending the definition of "employment" in the Labor Code, which was a prior action of the program, the plan also includes strengthening labor inspection oversight of compliance with this definition; applying new employment rules to prevent evasion of personal income taxes related to hidden employment; and submitting amendments to the Tax Code to parliament in 2026 to exclude from the second group of simplified taxpayers certain activities that carry high risks of concealing labor relations — including IT services, consulting services in accounting and auditing, marketing, engineering and law — and introduce higher differentiated rates for such activities for the third group of taxpayers.

"Digitalization and better data integration—including through our new “obryi” system—will help address informal employment," the memorandum notes.

Regarding strengthening the appointment process for supervisory board members of state-owned companies, this involves changing the structure of the nomination committee through a Cabinet of Ministers resolution based on recommendations from international financial organizations. The resolution will require all committee participants to adhere to strict confidentiality rules; allow citizenship to be considered only as a secondary factor among equally qualified candidates; strengthen evaluation procedures by pre-agreeing on interview questions and sharing draft assessments before interviews; develop an annual Finance Ministry assessment of supervisory board performance and link reappointment to results; and require the Finance Ministry to maintain a database of highly rated candidates from previous selection processes for future vacancies.

By the end of June 2026, amendments to the Tax Code must be submitted to parliament, including to align transfer pricing rules with OECD standards and implement Article 4 of the EU’s ATAD, and approve an updated state-owned enterprise strategy that addresses privatization goals and opportunities to extend protections provided under Article 7 of the Law on Banks and Banking to all systemically important state-owned banks.

Two other benchmarks have the same deadline: implement a critical third-party risk oversight system by bringing it into force, and the National Agency on Corruption Prevention must issue new rules establishing a risk-based asset declaration verification system, prioritizing high-level officials in designated high-risk areas.

Then by the end of July, a technical analysis must be published quantifying the costs of current quasi-fiscal activities in electricity, gas supply and heating, the incidence of existing subsidies, and financially sustainable reform scenarios for achieving gradual cost recovery while ensuring adequate protection of vulnerable consumers, taking into account findings from IMF technical assistance to the Energy Ministry.

The last three structural benchmarks have a deadline of the end of December this year: create a centralized data repository project for tax and customs administrations; strengthen the National Securities and Stock Market Commission’s decision-making structures and processes by amending the commission’s law to align governance with the Constitution and implement a two-tier governance structure, including a supervisory board with clearly defined roles and responsibilities; and appoint all members of the Accounting Chamber from vetted candidates in accordance with legislative amendments at the end of 2024.

The memorandum notes that by the end of April this year, an Expert Advisory Group must be established and six members appointed. Its task will be to vet candidates for Accounting Chamber membership.