Ukraine to Build a VAT Increase to 21% into the 2027 Budget: What Is Known About the New Tax to Support Business

The Government of Ukraine has included a mechanism for raising the value-added tax in the draft state budget for 2027. As reported by RBC-Ukraine, citing a publication by the Ministry of Finance, the rate increase is built in as a resource for launching business insurance against military risks and for providing additional financial support to entrepreneurs. At the same time, the Ministry of Finance stresses that for the measure to take effect, separate legislative regulation is required, i.e. approval by the Verkhovna Rada.

What Is Built into the 2027 Budget Draft

According to the Ministry of Finance's publication, a resource of 58.7 billion hryvnias is allocated in the draft state budget for the purpose of supporting entrepreneurship. "One of the possible sources for forming it is raising the standard rate by 1 percentage point — from 20% to 21%. A final decision on such a measure will require legislative regulation," the document states. Thus, the VAT increase is currently not an adopted decision but merely a scenario built into the draft, which still has to go through the parliamentary procedure.

Why Raise the VAT: Insurance of Business Against Military Risks

The intended use of the resource is to create a business insurance mechanism for companies suffering from Russian strikes. Recently, Economy Minister Oleksandr Khrachenko said that the Cabinet of Ministers is developing such a mechanism and plans to create a separate fund for it. According to the minister, the fund could be replenished both through support from international partners and by increasing the VAT. In parallel, the Cabinet announced the launch of preferential loans of up to 1 billion hryvnias to support business.

The Fuel Business and Excise Duties

In addition to the VAT, the government intends to allocate a further 8.3 billion hryvnias to protect the fuel business from military risks. According to the Ministry of Finance, this resource could be formed by raising the excise duty on fuel. Thus, the 2027 budget draft builds in two potential tax levers at once — on VAT and on excise duties, each of which requires a separate decision.

The Scale of Damage from Attacks

The justification for the new measures is the scale of the losses. According to an estimate by Economy Minister Oleksandr Khrachenko, the losses of Ukrainian business due to enemy attacks could reach 10 billion dollars. Prime Minister Serhiy Haidai, for his part, stated that due to attacks on business, the Ukrainian state budget has already failed to receive around 70 billion hryvnias. These figures form the fiscal context in which the government is seeking sources for compensation programs.

Contradictory Data

The statements of the parties contain significant uncertainty as to whether the VAT increase will be implemented at all. The Ministry of Finance formulates the measure as "one of the possible sources" for forming the resource and explicitly points to the need for legislative regulation, thereby reserving the right not to apply the increase. At the same time, Economy Minister Khrachenko did not rule out that the business insurance fund could be replenished through support from international partners — an alternative source that, if sufficiently large, could remove the need to raise the rate. In addition, open data feature two different damage estimates: 10 billion dollars — for business losses (Khrachenko) and around 70 billion hryvnias — for the state budget's lost revenues (Haidai); these are different metrics, but in the public sphere they are often presented as comparable. The final rate and funding sources will become known only after the adoption of the relevant law and the final version of the budget.