Ukraine's parliament has adopted the draft State Budget for 2027 at first reading, proposing to lift the standard VAT rate from 20% to 21% to help fund war-risk insurance for businesses.
Ukraine’s parliament has adopted the draft State Budget for 2027 (Draft Law No.16000) at first reading on 28 October 2026.
The proposed budget includes an increase in the standard VAT rate to fund war-risk insurance for businesses, alongside changes to tax-related thresholds, defence financing and state borrowing.
VAT increase to fund war-risk insurance
The draft proposes raising the standard VAT rate from 20% to 21%. The extra revenue is intended to help finance a programme insuring businesses against war-related risks. Under the scheme, enterprises would receive compensation more quickly for damage caused by Russian strikes.
Thresholds tied to tax
The draft sets the minimum statutory monthly salary (MSMS) for 2027 at UAH 9,546, with an hourly rate of UAH 57.50. The MSMS is used to calculate income tax-exempt income, employee benefits in kind, real estate tax rates and the eligibility threshold for the simplified tax regime.
The minimum subsistence level (MSL) is also set to rise to UAH 3,559 a month per person on average from 1 January 2027. The MSL is used to determine the taxation of pension income. Separate figures apply by group:
- children under six: UAH 3,124
- children aged six to 18: UAH 3,895
- able-bodied individuals: UAH 3,691
- individuals who have lost working capacity: UAH 2,878
The unified social contribution is capped on a monthly income base of 20 minimum wages, or 15 for military and police personnel.
Revenue, spending and deficit
Total budget revenues are projected at UAH 5.65 trillion, against expenditures of UAH 7.27 trillion. The deficit ceiling is set at UAH 1.67 trillion. Direct state debt is capped at UAH 12.31 trillion as of 31 December 2027, while state-guaranteed debt is capped at UAH 382.24 billion.
Defence funding
The draft routes 100% of the military levy to the special fund of the state budget to pay service members of the Armed Forces of Ukraine. Specific defence-related revenues are split as follows:
- 60% to the Ministry of Defence
- 30% to the State Service of Special Communications and Information Protection
- 10% to military units
Dedicated streams include proceeds from half of surplus military property sales, and recoveries from criminal assets, confiscations and plea agreements handled by anti-corruption and investigative bodies. State export control fees for military and dual-use goods are also earmarked for defence. State guarantees of up to UAH 30 billion may be allocated to programmes strengthening national defence and security.
International financing
The budget incorporates loans under EU Regulation 2026/467 (Loan Agreement dated 27 May 2026), split between general budget support and a special fund component for weapons procurement. It also authorises borrowing under EU Regulation 2024/2773, serviced from revenues generated by immobilised Russian assets. That borrowing would finance recovery, housing and reconstruction.
State assets and pensions
The National Bank of Ukraine must transfer at least UAH 48.7 billion of its distributable profit to the budget. Joint-stock companies with 50% or more state ownership that do not declare annual dividends by 1 May must pay 90% of net profit to the budget by 1 July. The deadline is 30 July for consolidated reporting entities.
During martial law, special pensions exceeding 10 subsistence minimums for persons who have lost working capacity will be reduced by coefficients applied to the excess. The consumer price index used for income indexation will take January 2027 as its baseline month.
The bill must still pass further readings in parliament before it becomes law.
Earlier, the Ukrainian Parliament considered the draft Law on the State Budget for 2027, which was submitted on 15 September 2026.
