Businesses to get changed tax rules on loans and borrowings: Ministry of Finance submits draft law

Ukraine plans to introduce unified tax accounting rules for company expenses on loans and other borrowings, regardless of who provided the financing. The new mechanism is set to take effect from January 1, 2028, and will align Ukrainian rules with EU legislation.

The Cabinet of Ministers has approved a draft law developed by the Ministry of Finance on the implementation of Article 4 of the European ATAD Directive. At the time of writing, the document has already been registered in the Verkhovna Rada under No. 16036 as of September 4 and submitted for consideration to the relevant committee. 

The key change is the transition from the current selective restriction to a unified rule for all debt obligations of the taxpayer. It will apply regardless of whether the lender is a resident or non-resident of Ukraine, as well as whether they are related or unrelated to the borrower.

Restriction of 30% EBITDA to remain

Excessive borrowing costs will be allowed to be taken into account for tax purposes within 30% of EBITDA - the company's financial result before interest, taxes, and amortization.

At the same time, the draft law provides for a number of exceptions so that the new rule does not apply to relatively small amounts of financing.

• the restriction will not apply to borrowing costs up to 500 thousand euros;
• the threshold may be up to 3 million euros for financing from unrelated persons, if such financing is not secured by related persons;
• special exceptions are provided for banks, insurance companies, and certain long-term public infrastructure projects.

The draft law does not introduce a separate rule of so-called thin capitalization.

Unused interest will not be lost

Another important change for business concerns interest expenses that could not be taken into account in determining the object of taxation due to the established restriction.

Such amounts may be carried forward to future tax periods without time limitation and in full.

The Ministry of Finance also provided a transitional mechanism: interest that companies could not account for under current rules and accumulated by the end of 2027 will not be canceled. It will be possible to account for it in accordance with the new mechanism.

Business will have time until 2028

The new rules are planned to be applied from January 1, 2028. Thus, companies will have a transitional period to review their financing structure and prepare for the new procedure for tax accounting of borrowings.

The Ministry of Finance notes that the implementation of Article 4 of ATAD is part of aligning Ukrainian tax legislation with EU law. The changes are also provided for by the National Revenue Strategy until 2030 and Ukraine's commitments to the International Monetary Fund.

The draft law itself has not entered into force yet. On September 4, the Verkhovna Rada received the document, registered it under No. 16036, and submitted it for consideration to the Committee on Finance, Tax and Customs Policy. 

Based on materials: Ministry of Finance of Ukraine, Verkhovna Rada of Ukraine