Corporate Tax 2026: Ukraine Trends and Developments

Andriy Reun, Partner and Head of Tax and Ihor Bielitskyi, Senior Associate, exclusively for Chambers and Partners.

Introduction

Ukraine’s current tax system resembles a complex mechanism striving to perform two seemingly contradictory functions: sustaining business viability under extreme conditions while ensuring maximum budget revenue. The state is doubling down on sectoral stimulation, creating specialised “oases” for strategically vital industries, ranging from the IT sector within Diia.City to the defense industry. These preferential regimes are becoming engines of recovery, allowing critical economic segments to not only survive but also attract investment despite high wartime risks.

At the same time, oversight and digital transparency are becoming more intense. The reinstatement of planned tax audits and the intensified enforcement of tax legislation have become the defining trends of the current year. The State Tax Service is increasingly deploying a risk-oriented approach, under which every questionable move by a taxpayer is placed under the microscope, with a focus on identifying aggressive tax planning and ensuring compliance with previously enacted tax regulations. This creates a new reality where tax discipline is no longer a mere formality but a matter of reputation for any legitimate business.

The synthesis of these two vectors, supporting strategic players while maintaining strict control over the broader market, is shaping the new face of Ukrainian fiscal policy. The path toward European integration requires Ukraine not only to harmonise tax rates but also to implement high transparency standards, including the automatic exchange of information and the “de-shadowing” of income.

At the same time, 2026 may bring significant further changes to tax legislation aimed at creating greater legal certainty, transparent rules, and harmonising local legislation with European standards.

Expected Changes in 2026 Regarding Transfer Pricing and Anti-Avoidance

In February 2026, the Ukrainian Ministry of Finance published two draft laws proposing major changes to the rules governing pricing between related companies and to anti-tax-avoidance regulations. These changes are part of Ukraine’s gradual adoption of OECD standards and are required for continued EU integration. They are expected to be enacted in one form or another.

Modification of transfer pricing rules

Transfer pricing rules require that transactions between related companies (for example, between a parent company and its subsidiary) be conducted on the same terms as transactions between independent parties. Ukraine has had these rules in place since 1 September 2013 and has been gradually aligning them with international standards.

On 24 February 2026, the Ministry of Finance published a draft law that would significantly tighten these rules.

Which transactions will be affected

Under the current rules, the requirements apply only to direct transactions with foreign companies exceeding UAH10 million, and only if the company itself has annual revenue of more than UAH150 million.

The draft law proposes to expand the scope of covered transactions. The following will be added:

• transactions between a Ukrainian company and its foreign branch;

• transactions between a foreign branch in Ukraine and its related parties, whether in Ukraine or abroad;

• transactions with Ukrainian companies that reported a loss exceeding UAH1 million in the previous year;

• transactions with related companies that benefit from a corporate income tax exemption or reduced rate; and

• transactions with companies belonging to multinational groups with total consolidated revenue of at least EUR50 million per year.

In addition, the UAH10 million per-transaction threshold will be abolished. The only remaining threshold will be UAH150 million of the company’s own annual revenue. Even that threshold will not apply to companies belonging to multinational groups with revenue of at least EUR50 million.

The following will also be added to the list of covered transactions:

• transfers of functions or risks between related parties, even where nothing is documented in the accounting records, but where, in practice, one company has stopped performing certain functions while another has started performing them; and

• transactions involving amendments to agreements that change the deadlines for the performance of obligations if this results in a change in the present (fair) value of such liabilities.

“Chain” replaced by “series of transactions”

Under the current rules, a sequence of transactions between a company and a foreign party through intermediaries that perform no real functions may be treated as a single controlled transaction (a “chain”).

The draft law replaces the concept of a “chain” with a “series of transactions.” The key difference is that a series does not have to be sequential; what matters is that the transactions are connected or aimed at achieving a common goal. All transactions within a series will be treated as controlled transactions.

Wider application of the arm’s length principle

The arm’s length principle requires that the terms of a transaction between related companies be the same as those that would apply between independent parties. Previously, this principle applied only to controlled transactions.

The draft law extends its application to certain non-controlled transactions as well, in particular for the purpose of determining the taxable profit of a foreign branch operating in Ukraine.

Disregarding a transaction: new grounds

Under the current rules, the tax authority may disregard a transaction for tax purposes if it lacks a reasonable economic purpose (the “business purpose” test). After the draft law is adopted, this test will be removed. It will be sufficient for the tax authority to show that the terms of the transaction differ from what independent parties would have agreed. The tax authority will be required to justify its decision if a dispute arises with the taxpayer.

Removal of the presumption in favour of the taxpayer’s method

Under the current rules, the pricing method chosen by the taxpayer is presumed to be correct — unless the tax authority can prove that another method is more appropriate. After the changes, this presumption will effectively be abolished. Instead, the law will introduce a list of specific (and fairly broad) grounds on which the tax authority may substitute a different transfer pricing method for the one chosen by the taxpayer.

New anti-tax-avoidance rules

In parallel, the Ministry of Finance has prepared a draft law implementing rules based on EU Directive 2016/1164 (ATAD). These rules significantly restrict common tax minimisation schemes.

Limit on interest deductions

Under the new rule, companies will be able to deduct interest expenses on loans only up to 30% of EBITDA (earnings before interest, taxes, depreciation and amortisation). Any interest exceeding this limit will not be deductible.

Excess interest carried over from previous years may be rolled forward to future years, but it will be reduced by 5% each year.

Exit tax

Currently, when a company transfers assets abroad (for example, by changing its jurisdiction or closing a Ukrainian branch), no additional tax arises. The draft law changes this: the value of assets that were “generated” in Ukraine will be taxed at the point when they leave Ukrainian tax control.

This applies in the following situations:

• moving assets or activities outside Ukraine;

• transferring property to a permanent establishment abroad; and

• certain other instances.

This rule applies to legal entities only — individuals are not affected.

General anti-abuse rule

Ukrainian law will introduce the concept of “tax abuse” — a transaction whose primary purpose is to obtain a tax benefit (through the non-payment or reduction of taxes) and which is artificial in nature or lacks genuine commercial reasons.

Where such abuse is identified, the tax authority will be able to disregard the legal form of the transaction and tax it based on its economic substance. This rule may apply to a wide range of arrangements.

Hybrid mismatch rules

Special rules will be introduced to address situations arising from differences between the tax systems of different countries:

• expenses are deducted twice;

• expenses are deducted without the corresponding income being subject to tax; and

• dual tax residency arises.

Under the new tax adjustment rules, the taxpayer’s financial result before tax will be increased by:

• amounts in respect of which expenses are deducted without the corresponding recognition of income (profits); and

• a portion of income attributable, under certain conditions, to an unrecognised (transparent) permanent establishment.

Incentives Currently Relevant in Different Spheres

IT sector

In order to stimulate the development of the digital economy in Ukraine, a special legal regime, Diia.City, has been introduced.

A resident of Diia.City may be a legal entity incorporated in Ukraine that carries out activities in the IT sector, including, inter alia, computer programming, consulting on informatisation, computer equipment management activities, publishing computer games and other programs, providing software products online, educational activities in the IT sector, cybersecurity services and other related activities.

For Diia.City residents, there are two methods of CIT taxation:

• Under the first option, a Diia.City resident pays CIT under the general regime at a rate of 18%. In this case, the taxable base is the accounting financial result.

• The second option provides for a special CIT regime. For Diia.City residents that opt for the special regime, CIT is levied at a rate of 9% under the distributed profit tax model (taxation applies only upon payments of dividends and royalties, free-of-charge transfers of goods, works and services, payments of financial assistance, payments in favour of a non-resident, transfers to the accounts of the Diia.City resident itself, which are located abroad, etc), as opposed to the standard 18% CIT imposed on accounting financial result.

There are also preferential PIT rules for income paid to employees and gig specialists. Such income is subject to PIT at a rate of 5% (instead of the standard 18%) and to the military levy at a rate of 5%.

Defence industry

A special legal regime, Defence City, has been introduced in Ukraine by the Law of Ukraine “On amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Support for Enterprises of the Defense-Industrial Complex” with the aim of promoting the development of the defence-industrial complex.

Legal entities incorporated in Ukraine that are engaged in the development or production of military equipment or defence technologies may qualify as Defence City residents, provided that at least 75% of their income (or 50% in the case of the aircraft manufacturing sector) is derived from activities in the defence sector. The status of a Defence City resident is granted by the Ministry of Defence of Ukraine on a voluntary basis.

Defence City residents are entitled to an exemption from CIT. However, the exempted profits have to be used for specific purposes defined by law, including:

• the development of the resident’s own business activities;

• the acquisition of corporate rights in defence-sector enterprises, including capital investments in such enterprises; and

• the acquisition of intellectual property rights for the performance of state contracts. An additional restriction is that it is not permitted to distribute dividends from profits that are exempt from taxation, except where such dividends are paid to the state or to state-owned enterprises.

Investment projects

Temporarily, until 1 January 2035, specific tax rules apply to the taxation of profits of investors with significant investments implementing an investment project, provided that such investor is a party to a special investment agreement concluded with the Cabinet of Ministers of Ukraine.

An investor with significant investments is a legal entity incorporated in Ukraine, specifically established to implement an investment project pursuant to a Special Investment Contract concluded with the Cabinet of Ministers of Ukraine. Its activities are exclusively directed toward the implementation of that project (within the fields of manufacturing, infrastructure, energy, etc) with a minimum investment threshold of EUR12 million. The profits of such an investor are exempt from corporate income tax for a period of five years following the submission of an application for the exemption.

In addition, such entities are entitled to VAT incentives, state support for the development of engineering infrastructure and exemptions from certain local taxes.

Industrial parks

The profits of participants in an industrial park that are derived from business activities in the manufacturing sector, as well as in certain other eligible sectors, are exempt from CIT for a period of ten years following the submission of an application for such exemption.

The operation of industrial parks in Ukraine is governed by the Law of Ukraine “On Industrial Parks”. Pursuant to this Law, an industrial park is a designated area equipped with the necessary infrastructure within which its participants may carry out business activities in the manufacturing sector, waste processing, alternative energy, as well as research and development activities.

However, all funds saved as a result of the tax relief must be reinvested in the development of the industrial park participant’s business activities.

Production of eco-friendly vehicles and components thereof

Temporarily, until 31 December 2035, profits from the production of eco-friendly vehicles and components thereof shall be exempt from CIT. The exemption may be claimed by legal entities whose sole business activity is the production and sale of electric motors, lithium-ion (lithium-polymer) batteries, charging devices for such batteries, electric vehicles, vehicles powered by gas or biogas and tram and metro cars. The amount of CIT exempted from taxation may be used only for purposes of research and development activities, the creation or refurbishment of the factories’ material and technical base and the expansion of production capacity.

Andriy Reun, Partner and Head of Tax and Ihor Bielitskyi, Senior Associate, exclusively for Chambers and Partners.