EU Considers Stricter Conditions for €90 Billion Loan to Ukraine, Linking Payments to Tax Changes
The EU is considering stricter conditions for a €90 billion loan to Ukraine, linking part of the payments to tax reforms. This includes introducing a 20% VAT for some companies to reduce the shadow economy. The first €6 billion tranche will arrive in June for drone procurement.
The European Union is considering strengthening the conditions for disbursing a €90 billion loan to Ukraine. Part of the payments may depend on the implementation of unpopular changes in corporate taxation, specifically the abolition of preferential tax treatment for some companies.
According to Bloomberg, the proposal would require Kyiv to introduce a 20% value-added tax for companies currently operating under the preferential system (5% of revenue) whose annual income exceeds 4 million hryvnias. Ukraine's Ministry of Finance and key donors believe this scheme burdens the budget, distorts competition, and fosters a large shadow economy.
While the new conditions will not affect key defense aid, their implementation may face difficulties due to the unpopularity of the measures and tensions between parliament and President Volodymyr Zelenskyy. The EU's goal is to conclude negotiations as quickly as possible, developing an ambitious reform program to strengthen Ukraine's economy and accelerate its integration with the EU.
The first tranche of the «military» part of the €90 billion EU loan will amount to €6 billion and will be disbursed to Ukraine no later than June, earmarked for the purchase of Ukrainian drones. Subsequent payments may include ammunition, drones, and air defense systems.