TAX ALERT 18.08.2026 | Digest of Key Tax News

Tax relief on backup power supplies: draft law was registered

On August 7, 2026, the draft Law No. 15483 “On Amendments to Subsection 2 of Section XX “Transitional Provisions” of the Tax Code of Ukraine regarding tax incentives for the purchase of backup power sources” was registered in the Verkhovna Rada of Ukraine.

It proposes that, for the duration of martial law, transactions involving the importation into the customs territory of Ukraine of generators, inverters, batteries, solar systems and equipment for autonomous water supply be exempt from VAT.

If adopted, the relevant law will come into force on the day following its official publication.

Taxation of defence-related goods: proposed amendments

Draft law No. 15463 dated August 3, 2026 and its alternative draft law No. 15463-1  dated August 6, 2026 have been registered in the parliament. 

The main draft law No. 15463 proposes to clarify the circumstances in which the VAT exemption applies to the import and initial supply of raw materials and components for the production of defence-related goods. 

It is proposed that this rule should apply where the relevant supply is wholly or partly funded, in particular, by a partner state or an international organisation in fulfilment of government contracts, international agreements, or foreign programmes of military, security or technical assistance.

In contrast, the alternative draft law No. 15463-1 proposes to extend these exemptions and further exempt from VAT the import of goods for use in the domestic production of defence products, provided that they are subsequently transferred to Ukraine’s security and defence forces.

The alternative draft law also introduces exemptions from VAT and excise duty on the import and supply in Ukraine of quad bikes and all-terrain vehicles for the needs of the defence forces.

The relevant committee of the Verkhovna Rada of Ukraine has already recommended that parliament adopt the alternative draft law No. 15463-1 as a basis and in its entirety.

Plans to amend the rules for sole traders – VAT payers

On August 6, 2026, the Ministry of Finance of Ukraine published draft law “On Amendments to the Tax Code of Ukraine Regarding the Improvement of Value Added Tax Administration” for public consultation.

The draft law concerns sole traders registered as VAT payers and provides, in particular, for the following changes: 

• pre-filling of reporting documents: the Electronic Cabinet will offer the option to automatically pre-fill tax returns and, provided a cash register or electronic cash register is used, certain details of tax invoices based on information held by the tax authority;
• reporting period: the calendar quarter will become the reporting (tax) period instead of the month;
• issuing tax invoices: it is proposed to introduce the option, no later than the last day of the month, to issue summary tax invoices for transactions involving the supply of goods or services to customers who are not registered as VAT payers, or where advance payment has been received from them;
• grounds for conducting audits: it is proposed to increase the threshold for budgetary refunds and/or negative VAT balances for conducting an unscheduled documentary audit from 100,000 UAH to 1 million UAH.

The Ministry of Finance proposes new rules for determining financial results

On August 12, 2026, the Ministry of Finance of Ukraine published draft law “On Amendments to the Tax Code of Ukraine regarding the implementation of rules to counter tax avoidance practices that have a direct impact on the functioning of the internal market of the European Union and Ukraine, in accordance with Council Directive (EU) 2016/1164 of 12 July 2016 (in respect of the provisions of Article 4 of that Directive)”.

In particular, in the context of the rules for determining financial results, it is proposed to introduce the concept of “borrowing costs”. It will include costs arising from the accrual and payment of interest on all types of debt obligations, as well as other costs that are economically equivalent to interest or incurred in connection with raising finance. 

The impact of such expenses on the financial result is to be capped at an amount equal to interest income plus 30 per cent of EBITDA, which is defined as the taxable object plus amortisation plus excess expenditure. 

Excess expenditure exceeding this limit will increase the financial result for the current period, but may be carried forward to subsequent tax periods without any time limit. At the same time, taxpayers will be able to carry forward any unused expenditure limit for use over a period of 5 years.

Furthermore, the draft law provides for exemptions from the rule limiting borrowing costs for banks, insurers and operators of long-term public infrastructure projects.

Meanwhile, for residents of Diia City, any amount exceeding the established limit will be treated as a tax base subject to an 18 per cent tax rate, with the possibility of subsequently offsetting it against the tax payable by such taxpayers.

It is planned that, if the relevant law be adopted, the new rules will come into force on January 1, 2028.

Updated rules for appealing against tax authority decisions: draft law

On August 14, 2026, draft law No. 15516 “On Amendments to the Tax Code of Ukraine in Connection with the Adoption of the Law of Ukraine “On Administrative Procedure” was registered with the Verkhovna Rada of Ukraine.

This document proposes to amend the provisions of the Tax Code of Ukraine concerning, in particular:

• time limits for administrative appeals: the general time limit is extended to 30 calendar days, whilst the 10 working days remain in place for tax assessment notices and decisions concerning the circulation of excise goods;
• appeals against actions and omissions: in addition to decisions made by the tax authority, taxpayers will be able to lodge complaints against its actions and omissions. Appeals against the latter may be submitted within six months of the date on which the person became aware of the infringement of their rights;
• restoration of missed deadlines: a mechanism is being introduced to allow the deadline for lodging a complaint to be restored if it is missed for valid reasons (for example, illness or a business trip). A corresponding application may be submitted within 10 working days of the cessation of such circumstances, but no later than one year from the date of adoption of the administrative act;
• changes to the procedure for lodging complaints: from now on, complaints will be lodged not with a higher-level authority, but directly with the tax authority that adopted the relevant decision.

The draft law also harmonises the terminology (in particular, it establishes the terms “administrative act”, “administrative proceedings” and “procedural decision”) and certain procedural mechanisms of the Tax Code of Ukraine with Ukrainian legislation on administrative procedure.

Supreme Court digests: tax aspects

During this period, the Supreme Court published a series of digests of its own case law:

• on August 12, 2026, a digest of the case law of the Grand Chamber of the Supreme Court and reviews of the case law of the cassation courts within the Supreme Court for the first half of 2026 were published;
• on August 14, 2026, a review of the current case law of the Administrative Court of Cassation within the Supreme Court for July 2026 was published.

These documents highlight legal positions on various tax issues. One such issue concerned the rules for recognising expenses arising from exchange rate differences and arrears on penalties payable to non-residents. 

Thus, in its judgement of July 16, 2026 in case No. 640/4000/19, the court, in particular, examined the lawfulness of a taxpayer’s recognition of exchange rate differences on foreign currency payables to a non-resident supplier. The court noted that arrears under a contract for the supply of goods, denominated in foreign currency and partially settled during the period under audit, constitute trade-related monetary liabilities and are to be recognised as expenses of the taxpayer.

Furthermore, the ruling confirms that, for the purposes of adjusting the financial result by the amount of fines, penalties and liquidated damages payable to a non-resident, the decisive factor is the status of that non-resident as a taxpayer.