Ukraine has passed new tax incentives intended to boost investment in its processing and manufacturing sectors. Once officially approved, the legislation will allow businesses to recover a significant portion of capital investments through tax relief, offering exemptions from import duties, VAT, and up to ten years of corporate income tax. Local authorities may also provide land and property tax breaks with eligibility extended to both new and existing entities, except those in industries such as alcohol and tobacco.
A new era for industrial investment
These tax incentives were passed as part of an initiative to attract investment into Ukraine’s processing and manufacturing sector. Specifically, the new legislation was designed to make Ukraine a top destination for industrial growth and post-war economic recovery by offering a mechanism for partial compensation of capital investments through tax and customs breaks.
Specifically, these incentives include the following:
- Partial compensation for capital investments – Businesses in the processing industry can recover between 30% and 70% of their capital investments through tax relief.
- Tax and customs breaks –
- Exemption from import duties and VAT on new equipment and components.
- Up to ten years of corporate income tax exemption.
- Land and property tax exemptions for eligible projects from local authorities.
- Promotions for businesses in a variety of sectors –
- The programme targets both new and existing legal entities in the processing industry, excluding sectors like alcohol and tobacco.
- Eligible expenses include building infrastructure, upgrading or acquiring production facilities, purchasing new equipment, and acquiring industrial land.
How much can a business get back?
- Investments of EUR 100,000 to EUR 1 million: up to 70% compensation.
- EUR 1 million to EUR 20 million: up to 50%.
- EUR 20 million to EUR 50 million: up to 30%.
- Investments above EUR 50 million are not eligible with support focused on small and medium-sized projects.
Why this matters
Ukrainian industry leaders and policymakers broadly support this initiative, seeing it as a proven tool for accelerating industrial modernisation. While some international organisations have questioned its long-term sustainability, the Ukrainian government is confident that the benefits will be tied directly to real investment activity, which means there will be no immediate pressure on the state budget.
What should investors do next?
For companies already operating in Ukraine or considering entry, these incentives could be transformative as the country rebuilds and modernises. The legislative process is, however, ongoing and further regulations (e.g. the creation of an investor registry) are expected before the programme is fully implemented.
If enacted, this programme could make Ukraine one of the most attractive manufacturing hubs in the region, offering substantial financial advantages for investors.
For more details and advice on investing in Ukraine, contact your CMS client partner or the Ukrainian experts who wrote this article: Natalia Kushniruk, Viktoriia Stavchuk-Mulundkar.
