The Cabinet of Ministers of Ukraine is planning a large-scale reform to protect entrepreneurship and is preparing to launch a special fund to insure businesses against war risks. However, the implementation of such an initiative could lead to changes in the country’s economic policy, specifically an increase in the value-added tax (VAT) by 1 percentage point.
This was announced by Minister of Economy and Environment Oleksandr Kravchenko during a meeting with journalists.
Why are the existing programs insufficient?
According to estimates by the Ministry of Economy, losses incurred by Ukrainian businesses this year due to hostile attacks could reach an unprecedented $10 billion.
“We understand that the programs we currently have—the loss compensation program and the ‘5–7–9%’ preferential lending program—cannot meet the needs of all businesses. They work for SMEs, but do not cover the needs of large businesses,” noted Oleksandr Kravchenko.
To address this issue, the government proposes creating a special insurance fund that will guarantee businesses compensation of up to $10 million for the first loss resulting from Russian aggression. The insurance premium is planned to be set at 2% of the asset’s value, and the program to engage private insurers could be launched as early as the beginning of 2027 throughout Ukraine.
Why are they planning to raise taxes?
The insurance premium alone—at 2% of the asset’s value—will not be enough to fully cover the new fund’s needs. According to the ministry’s calculations, an initial capital of $2–3 billion is required.
If insurance were to remain voluntary and no additional state resources were drawn upon, the contribution rate for businesses would have to be raised to an unsustainable 20%. Therefore, the government is considering recapitalizing the fund through international partners and the state budget.
Among the key options for funding the fund, the Ministry of Economy cites:
- A 1% increase in the VAT rate (from 20% to 21%)—the ministry considers this option the best solution, although a final decision has not yet been made and discussions are ongoing.
- Alternative: introducing a temporary import duty and roughly doubling existing import duties.
What short-term measures are being prepared for businesses?
While preparations for a long-term insurance fund are underway, the government is implementing immediate support measures:
- Expanding the geographic scope of insurance: The existing war risk insurance program (which provides for up to 30 million UAH in compensation but currently operates mainly in frontline regions) is planned to be expanded to Kyiv and the Kyiv region.
- Changes to lending: The “5-7-9%” preferential loan program is set to be extended to large businesses, which have been hardest hit by the destruction of production facilities and supply chains (previously, it was available only to small and medium-sized enterprises).
Our media outlet in Zakarpattia will closely monitor developments, as any nationwide tax changes and new instruments for insuring against war risks will directly impact the economic situation in the region and entrepreneurs’ plans for the coming years.
