Important Draft Laws, Issue 59: A Moratorium on Changes to FOP Taxation and Increased Funding for the Armed Forces

Reallocation of 2026 state budget expenditures in favor of defense and an increase in funding for the Armed Forces by UAH 100 billion

Bill No. 14311 proposes amending the 2026 state budget by increasing defense spending by UAH 100 billion (from UAH 1.143 trillion to UAH 1.243 trillion, or by 8.7%). The increase would be financed through cuts to the following programs:

In addition, the bill proposes redirecting the remaining unused funds from social insurance and unemployment insurance funds to the procurement and repair of weapons, rather than to industrial parks, subsidies for domestically produced agricultural machinery, or “investment nannies.” The draft law also proposes removing from the budget a provision allowing the government to allocate an additional UAH 15 billion to the Ukrainian Financial Housing Company through the issuance of domestic government bonds, and reallocating nearly half of the funds earmarked for road repair and construction (UAH 6 billion out of UAH 12.6 billion) to roads of strategic importance to be designated by the Ministry of Defense of Ukraine.

Tax incentive for long-term investments through an individual investment account

Currently, individuals can buy and sell securities through an investment company. The process works as follows: an individual transfers funds to the investment company, which then buys or sells shares or bonds on the market on the individual’s behalf. After the purchase, the securities are recorded in the owner’s name in a dedicated securities account. Taxation depends on the type of securities. Interest income and bond coupons (excluding government bonds), as well as dividends received from a foreign company or from an entity that is not a corporate income tax payer, are taxed at a rate of 19.5% (18% personal income tax plus a 1.5% military levy). The same rate applies to investment income, specifically when an individual sells securities at a price higher than the purchase price. Dividends paid by a Ukrainian company that is a corporate income tax payer are taxed at a rate of 6.5% (5% personal income tax plus a 1.5% military levy).

Bill No. 14296 proposes a mechanism to encourage long-term savings. Under the bill, individuals would be able to open an Individual Investment Account (IIA) with a special tax regime—featuring a zero rate of personal income tax and the military levy—at an investment company. To qualify for the incentive, the IIA would have to be maintained for at least five years, during which withdrawals would not be permitted. Funds held in the account could be invested only in securities issued in Ukraine by Ukrainian companies. Annual contributions would be capped at 300 minimum wages (currently UAH 2.6 million). The National Securities and Stock Market Commission of Ukraine may establish additional restrictions on the use of the account and on the list of securities eligible for investment through it.

If an account holder violates these rules—for example, by planning to withdraw funds early, investing in non-Ukrainian companies, or contributing more than the permitted amount—the applicable tax rate would be 18% personal income tax plus a 1.5% military levy. A taxpayer may hold only one individual investment account. However, the taxpayer may open an IIA with another investment company and close the account with the previous one; in such cases, the taxpayer would temporarily have two accounts. Investment companies would notify the tax authorities of the opening and closing of IIAs. Accordingly, the tax authority would refuse to open an IIA if an individual attempted to maintain such accounts with two or more investment companies simultaneously.

Moratorium on changes to the taxation rules for FOPs under the simplified system

Currently, sole proprietors operating under the simplified tax system must select one of four single tax groups (Groups 1 through 4). The selected group determines the permitted types of economic activity, annual income thresholds, and the method used to calculate the tax.

Group 1 includes FOPs without hired employees who either sell goods at retail markets or provide household services to the population. No other types of activity are permitted under this group. The single tax is set at 10% of the subsistence minimum as of January 1 of the relevant year and does not depend on the FOP’s income, whether measured by earnings or turnover.

Group 2 applies to FOPs that employ no more than 10 workers. They may manufacture and sell goods, operate in the restaurant sector, or provide services, with clients limited to the general public or other single taxpayers. Group 2 FOPs are prohibited from providing services to municipal enterprises, non-profit organizations, budget-funded institutions, legal entities, and FOPs that do not operate under the simplified tax system. The single tax is set at 20% of the minimum wage as of January 1 of the relevant year.

Group 3 is suitable for FOPs that wish to work with a broad range of clients and face no restrictions on hiring employees. The main constraints relate to prohibited types of activity. As with Group 2, these include gambling, currency exchange, most transactions involving excisable goods (such as alcohol and tobacco), mineral extraction, postal services, and telecommunications. The tax rate is 5% of income, or 3% if the FOP is registered as a value-added taxpayer.

Group 4 is the “agricultural” group and applies exclusively to farming enterprises engaged in the production and sale of their own agricultural products. In this group, the single tax is calculated not based on income, but on the normative monetary valuation of the land cultivated by the FOP.

Bills Nos. 14295 and 14285 propose “freezing” these rules as of January 1, 2026, and prohibiting any further tightening. Specifically, the bills would ban increases in single tax rates and the expansion of the tax base—for example, by adding passive income such as interest, dividends, royalties, insurance payments, or compensation to the amounts FOPs receive from the sale of goods or services. The proposals would also prohibit the introduction of new restrictions on permitted types of activity or on the range of allowed clients or counterparties for FOPs, a provision primarily affecting Group 2. The difference between the two bills is as follows: Bill No. 14295 would entrench these prohibitions without reference to martial law, whereas Bill No. 14285 would make them temporary, applicable for the duration of martial law and until the end of the year in which it is terminated or lifted.

The Cabinet of Ministers could be required to publish supporting materials for draft regulatory acts

Currently, the Cabinet of Ministers of Ukraine is required to publish in advance only those draft acts of significant public importance that affect citizens’ rights and obligations. However, this requirement does not apply during martial law. The bill proposes obliging the Cabinet of Ministers to publish drafts of all its acts together with accompanying materials, including an explanatory note with financial and economic calculations; a strategic environmental assessment; the results of public anti-corruption and/or anti-discrimination reviews and public consultations (if conducted); a certificate confirming coordination of the draft act with other public authorities; a statement of compliance with Ukraine’s European integration obligations and EU law (the EU acquis); an opinion of the European Commission (if available); and a comparative table where a draft amends other Cabinet of Ministers acts.

Strengthening the independence of the National Energy and Utilities Regulatory Commission from the government

At present, the government exercises significant influence over the National Energy and Utilities Regulatory Commission of Ukraine (NEURC). In particular, at meetings of the Cabinet of Ministers of Ukraine, the Commission’s interests and issues are represented by the prime minister; the government may repeal acts adopted by NEURC; and the Commission is required to coordinate licensing conditions for enterprises providing centralized water supply, wastewater disposal, and heat supply with the Ministry for Development of Communities and Territories. Members of NEURC are selected by a selection commission established by the Cabinet of Ministers. Currently, this commission consists of three representatives from the Verkhovna Rada Committee on Energy, Housing, and Utilities Services, and one representative each from the Ministry of Energy and the Ministry for Development of Communities and Territories.

Bill No. 14282 would prohibit the Cabinet of Ministers of Ukraine from influencing the National Energy and Utilities Regulatory Commission of Ukraine. It provides that, within the Cabinet of Ministers, matters related to the commission would be presented by its chair; that the Cabinet of Ministers would no longer be able to repeal NEURC decisions; and that, instead of approving licensing rules, the Commission would conduct written consultations with the Ministry for Development of Communities and Territories.

The bill also proposes changing the composition of the selection commission responsible for selecting members of the National Energy and Utilities Regulatory Commission. The commission would consist of six members: two nominated by the relevant Verkhovna Rada committee, one by the Ministry of Energy, and three appointed by the Cabinet of Ministers based on a joint proposal from the European Commission and the Energy Community Secretariat.

To further strengthen the independence of the Commission, the bill proposes removing its staff from civil servant status and granting NEURC the authority to independently approve its organizational structure, staffing plan, headcount, remuneration arrangements, and recruitment rules. Because this agency is funded through utility tariffs, the bill also proposes that the Cabinet of Ministers no longer be able to amend the Commission’s budget estimate, as it currently does, but retain the right to publish its opinion on it.

Status and labor guarantees for employees of the military administrations of settlements

The Law of Ukraine “On the Legal Regime of Martial Law“ stipulates that the President may establish military administrations in settlements (including cities, towns, and villages) and appoint their heads. Such administrations include seconded military personnel, law enforcement officers, and State Emergency Service employees, as well as other individuals hired under employment contracts, for example, employees of local self-government bodies or other citizens. At present, these employment contracts are concluded with the regional military administration. At the same time, current legislation does not explicitly define the status of employees of military administrations in settlements: their positions are neither classified as local self-government positions nor as civil service posts. As a result, they do not take an oath and do not have the status of public officials. At the same time, their remuneration is determined under the rules applied in local self-government bodies, but without provisions on ranks or seniority-based allowances.

Bill No. 14319 proposes that employees hired to military administrations under employment contracts conclude such contracts not with the regional military administration, but with the military administration of the settlement in which they would work. The bill also proposes extending the scope of the Law of Ukraine “On Service in Local Self-Government Bodies” to employees of military administrations who perform functions inherent to local self-government. It would allow military administration employees to be assigned ranks comparable to those of analogous positions in local self-government bodies, with such decisions approved by the head of the army administration, while ranks for heads of community military administrations would be assigned by the head of the district military administration. The bill further provides that, if local self-government officials (heads of local councils, their deputies, secretaries, and heads of executive committees of councils) are appointed to positions in a military administration, they would take unpaid leave from their previous positions but retain those positions and the associated guarantees of service in local self-government bodies.

If a village, settlement, or city mayor is appointed as the head of a military administration, the previously held position and the legal guarantees of service in local self-government bodies, as outlined in the Law of Ukraine “On Service in Local Self-Government Bodies,” would be retained for the duration of service in that role.

Changes to requirements for drivers’ working time

Bill No. 14280 would revise the rules governing the monitoring of drivers’ working time and the use of tachographs in road transport. It would harmonize Ukrainian regulation with the European Union’s approach to supervising drivers’ work and rest regimes, as well as the use of tachographs, drawing particularly on EU Regulation No. 561/2006 and the current rules on “smart” tachographs. The bill establishes a more transparent framework for the use of tachographs, including mandatory application in defined cases, separate rules for “smart” tachographs, remote pre-selection of vehicles for inspection, and stricter liability for carriers that fail to comply with drivers’ work and rest time requirements.

At present, these matters are regulated primarily through secondary legislation, including the regulation on drivers’ working time and rest periods; the instruction on the use of tachographs, which, among other things, sets out rules for their installation and calibration; an order approving standard card formats for digital tachographs; and the procedure for maintaining the register of entities authorized to install and service tachographs. Currently, tachographs are mandatory in Ukraine, first, for international passenger and freight transport, reflecting the country’s international obligations, and second, in cases where rules on recording drivers’ working time and rest periods apply—namely, domestic passenger transport by buses with a gross vehicle weight of 3.5 tons or more over distances exceeding 50 km, and freight transport with a gross vehicle weight exceeding 12 tons. These rules do not apply to departmental transport carried out by the police, emergency services, ambulances, the transport of specialized road maintenance equipment, or similar operations.

According to the bill, tachographs must be installed on all freight vehicles with a permissible maximum weight exceeding 3.5 tons, as well as on vehicles designed to carry more than nine persons, including the driver.

The bill also establishes that “smart” tachographs must automatically record the location where a driver’s working period begins and ends, instances of crossing the state border, and loading and unloading locations. In addition, the supervisory authority—the State Service of Ukraine for Transport Safety (Ukrtransbezpeka)—would be granted the right to remotely retrieve specific data from such tachographs, including indications of interference or malfunctions, power supply interruptions, operation without a valid card, time adjustments, calibration data, vehicle identification, and speed, for pre-selecting vehicles for roadside inspections.

The bill mirrors the drivers’ work and rest regime set out in Order No. 340: a 45-minute break after 4 hours and 30 minutes of driving; a daily driving limit of 9 hours, with the option to extend driving time to 10 hours twice per week; a weekly maximum of 56 hours; and no more than 90 hours over two consecutive weeks. The bill also prohibits carriers from organizing work schedules, delivery deadlines, or remuneration systems in a way that would compel drivers to violate the prescribed regime.

Liability for violations would be significantly increased. Instead of the current nominal fine of UAH 340 for breaches of work and rest time rules, the bill proposes a fine of UAH 8,500. Violations of regulations governing the handling of tachograph data would be punishable by a fine of UAH 10,200; interference with or circumvention of a tachograph would carry a fine of UAH 17,000; and driving without a driver card—where a tachograph is mandatory—would result in a fine of UAH 5,100 (a driver card is a personal smart card used to identify a specific driver and record data on the driver’s work).

New law on political parties

Bill No. 14289 proposes a new version of the current Law of Ukraine “On Political Parties in Ukraine.” First, it revises the rules for establishing a political party. Under the current law, a party may be established by at least 100 persons; however, this decision must be supported by the signatures of at least 10,000 voters, with signatures collected in at least two-thirds of the districts in at least two-thirds of Ukraine’s regions.

Under the bill, a party could be established by at least 200 founders. These individuals must be Ukrainian citizens who are eligible to vote and are not members of any other registered political party. At the founding congress, the founders would decide to establish the party, approve its charter and program, elect its leadership, and designate a person responsible for registration procedures. Following state registration, their powers as founders would terminate.

The bill would allow registration documents to be submitted online via the electronic services portal for legal entities and through the Diia Unified State Web Portal of Electronic Services. It would also require a political party, within six months of its registration, to establish and register regional organizations in at least five regions. By contrast, the current law requires regional organizations to be established within six months in a majority of Ukraine’s regions, as well as in Kyiv, Sevastopol, and the Autonomous Republic of Crimea.

The bill further provides that party governing bodies must include at least 40% representatives of each gender and that charter documents must set out gender and age quotas for governing bodies and electoral lists. Parties would also be required to adopt a binding code of ethics for their members. In addition, the bill prohibits the use of an individual’s surname, given name, and patronymic in a party’s name.

Finally, the bill would change the frequency of parties’ financial reporting to the National Agency on Corruption Prevention. Parties that receive funding from the state budget would report quarterly, while other parties would submit reports once every six months. Under current rules, all parties are required to report every quarter.