European Commission's report on Ukraine's European integration: what about taxes?

The updated report of the European Commission states that:

1. Value added tax:
- The VAT in Ukraine is partially in line with EU standards. However, tax exemptions, reduced rates, and improved VAT administration need to be fully reviewed to achieve full compliance with the EU acquis.

2. Excise taxation:
- The excise structure in Ukraine also needs to be finalized to comply with EU standards. Fuel excise rates should be harmonized with the EU level by 2028. For alcoholic beverages, it is necessary to ensure consistency in the classification and units of measurement for the tax base, except for beer and mixed drinks.

3. Direct taxes:
- The personal income tax remains unchanged. The corporate profit tax is also not fully compliant with the EU acquis. The development of a regulatory framework for the introduction of a general anti-abuse rule, exit taxes, and interest rate caps has begun.

4. Administrative cooperation:
- Ukraine has concluded double taxation treaties with all EU member states and started automatic exchange of financial account information in 2024. However, it is still necessary to establish a central communication office for the exchange of information with EU member states and to finalize preparations for the implementation of the Administrative Cooperation Directive (DAC7).

5. Digitalization strategy for the State Tax Service (STS):
- A separate IT strategy for the digitalization of the STS should be approved and the implementation of business process automation solutions should be continued to increase its administrative capacity.

These steps will contribute to the harmonization of Ukraine's tax legislation with the EU acquis, which is part of the overall strategy for EU accession.