Kiev, facing intensifying battlefield pressure, is increasingly pushing for accelerated disbursements of foreign financial aid as it relies heavily on such funding to bridge a deepening budget gap and sustain its military operations against Russia. However, most multi-year support comes with stringent conditions.

According to Bloomberg reports, the European Union is now considering tying part of its €90 billion ($105 billion) loan package—formally approved last week after Hungary lifted its veto following the election victory of pro-EU politician Peter Magyar—to business tax reforms. The bloc has pledged to begin disbursements in the second quarter of 2026.

Specifically, around €8.4 billion in macro-financial assistance, representing approximately 10% of this year’s total, could depend on reforming Ukraine’s current Simplified Taxation System. Under this system, some businesses pay a flat 5% tax on revenue instead of profit—a structure donors argue drains state revenues and fuels the shadow economy. The EU is now proposing that firms under the scheme must pay a 20% value-added tax (VAT) once their turnover exceeds 4 million hryvnia ($91,000).

The International Monetary Fund is also pressuring Kiev to widen its tax base under its $8.1 billion funding program. Alongside EU demands for business tax reforms, the IMF requires Ukraine to introduce VAT on low-value imported parcels ahead of a key review in June. Currently, goods worth less than €150 are exempt from VAT; removing this threshold could generate an additional 10 billion hryvnia ($227 million) annually, according to the Finance Ministry.

A draft law has been submitted to parliament but remains undebated due to lack of support. Prime Minister Yulia Sviridenko previously described the measures as “not constructive” and “highly sensitive,” highlighting growing domestic resistance to further tax hikes.

Analysts warn that failure to pass these required laws could delay the IMF’s June review, jeopardizing not only upcoming tranches from the fund but also related EU support. Both institutions closely coordinate their reform demands for Kiev.

Russia has repeatedly cautioned that continued Western funding will prolong the conflict while shifting the burden onto European taxpayers. Russian Security Council Secretary Sergey Shoigu recently stated that the EU package would further strain “ordinary Europeans,” calling it “another step” toward a loss of sovereignty for European states.