Ukraine has proposed legislation to align its tax rules with EU standards from 1 January 2028. The measures introduce exit taxation, a general anti-avoidance rule, hybrid mismatch restrictions and stricter tax residency and permanent establishment requirements.
Ukraine’s government has approved Draft Law No. 16150 prepared by the Ministry of Finance to implement provisions of the Anti-Tax Avoidance Directive (2016/1164) (ATAD) aimed at combating aggressive tax planning.
Draft Law No. 16150 was submitted to parliament (Verkhovna Rada) on 15 October 2026, outlining comprehensive amendments to the Tax Code of Ukraine aimed at aligning national tax regulations with European Union standards, specifically addressing anti-tax avoidance practices and hybrid mismatches.
If adopted, the new rules will take effect on 1 January 2028.
Exit tax rules
- Scope and taxable scenarios: Ukraine’s proposed exit tax applies to corporate income taxpayers and non-residents operating through Ukrainian permanent establishments (PEs). It covers asset transfers to foreign PEs, changes in tax residency, asset reclassifications and the transfer or termination of PE activities abroad where Ukraine loses its taxing rights.
- Calculation of taxable gains: Taxable gains are calculated as the positive difference between an asset’s market value at the time of transfer, determined under the arm’s length principle, and its tax base value. Negative gains cannot offset other taxable income or be carried forward as deductible losses.
- Exemptions for temporary transfers: Temporary transfers lasting up to 12 months may be exempt when used for securities financing transactions, collateral arrangements, prudential capital requirements or liquidity management. If the asset is not returned within 12 months, the exit tax applies retroactively from the original transfer date. Certain transfers between parent companies and subsidiaries or between head offices and PEs are also excluded where Ukraine retains its taxing rights.
- Transfers into Ukraine: Assets transferred into Ukraine from an EU member state that imposed an exit tax will be recognised at the market value determined by that state.
General anti-abuse rule (GAAR)
Ukraine’s proposed general anti-avoidance rule (GAAR) allows tax authorities to challenge arrangements designed primarily to obtain tax benefits that conflict with the purpose of tax legislation and lack genuine commercial substance. The tax authorities bear the burden of proving tax abuse.
A commission within the State Tax Service must review suspected cases before an audit can be ordered. Taxpayers receive 45 days to submit explanations and evidence, and audits may last up to 18 months, with a possible 12-month extension. Taxpayers can object to audit findings within 30 days and request independent experts to participate in the commission’s review. Final tax assessments require the commission’s formal conclusion.
Elimination of hybrid mismatches
Ukraine’s proposed hybrid mismatch rules aim to eliminate tax advantages arising from differences in how Ukraine and foreign jurisdictions classify financial instruments, entities and payments. The rules apply to associated enterprises, generally based on ownership, voting rights, profit entitlements or significant influence.
The measures deny deductions for payments that are deductible in Ukraine but not included in the recipient’s taxable income, and require income to be taxed in Ukraine when the payment was deducted abroad. They also restrict double deductions and deductions for payments that finance hybrid mismatches elsewhere in a corporate group.
Reverse hybrid entities registered in Ukraine and at least 50% owned by associated foreign entities that treat them as taxable will generally be considered Ukrainian tax residents, subject to an exemption for collective investment instruments.
Additional enforcement & residency rules
Ukraine’s draft law introduces additional anti-avoidance measures, including treating foreign entities effectively managed from Ukraine as Ukrainian corporate income tax residents and denying deductions for expenses arising from transactions without genuine commercial purpose. It reduces the service permanent establishment threshold to 183 days in any 12 months and imposes a UAH 600,000 fine for operating through an unregistered PE or conducting effective management in Ukraine without tax registration.
Single taxpayers in Groups 1–3 involved in tax abuse schemes would face an 18% tax on abuse-related revenue and be required to switch to the general corporate income tax regime.
