Ukraine Moves to Incentivise Processing Industry Investments

In August 2025, the Parliamentary Committee supported in first reading of two draft laws aimed at introducing a “tax compensation for investment” model for the processing industry.

What the draft laws propose

• Objective: Shift Ukraine away from a raw-material export model towards value-added production, encouraging investments in construction, modernisation, technical upgrades, equipment and land for processing facilities.

• Duration: Incentives valid for 2026–2035.

• Compensation rates, depending on investment size:

  
  

  • €100,000 – €1 million → 70%

  • €1 million – €20 million → 50%

  • €20 million – €50 million → 30%

  
  

• Taxes eligible for compensation:

  
  

  • Corporate profit tax (provided ≥ 90% of income comes from sales of own processed products);

  • VAT and import duty on new equipment;

  • Land tax and municipal land lease fees.

  
  

IMF want discussion on next steps

The IMF has raised concerns over the adoption process, stressing the need for consultations before moving forward. Ukrainian officials insist the concept should be moved on rather than shelved before it has a chance to work.

Why this matters

• For investors: A clear, quantified incentive mechanism for large-scale industrial projects.

• For manufacturers: A pathway to upgrade production with tangible economic benefits.

• For policymakers: A potential tool for diversifying the economy and reducing reliance on low-margin commodity exports.

• For the investment climate: A signal that Ukraine seeks to align tax policy with long-term industrial development, though IMF alignment will be critical.