Authorization
On 01 July 2025, leading energy associations of Ukraine, including the Ukrainian Wind Energy Association, the European-Ukrainian Energy Agency, the Ukrainian Renewable Energy Association, and the Solar Energy Association of Ukraine, sent an urgent appeal to the Prime Minister of Ukraine Denys Shmyhal, Minister of Energy German Galushchenko, and the Head of the Verkhovna Rada Committee on Finance, Tax, and Customs Policy, Danylo Hetmantsev. In the appeal, they called for an immediate resolution to a taxation issue that could significantly impact the country’s entire energy market amid war and financial crisis.
The central issue is a temporary provision in the Tax Code (paragraph 44 of subsection 2 of section XX), which allows energy companies to determine their VAT obligations using the cash accounting method. In simple terms, companies pay VAT not at the moment of electricity supply, but only after receiving actual payment for it. This mechanism is an effective tool for balancing financial flows and minimizing risks, especially when the market is suffering from multi-million-euro chain debts.
This provision is set to expire on 01 January 2026. An attempt to extend it until 2028 through amendment No. 69 to the draft law No. 13157 is currently blocked. According to the associations, the relevant parliamentary committee did not support this initiative due to the absence of an official position from the Cabinet of Ministers. Such uncertainty creates enormous risks for all market participants and negatively affects the investment climate in the energy sector.
To emphasize the criticality of the situation, the associations provide current data on market debt. As of June 2025, the overall situation is as follows:
If the cash accounting method is not extended, starting from January 1, 2026, producers will be forced to accrue and pay VAT on the entire amount of electricity supplied but not yet paid for. This means they will have to pay taxes on money they have not yet seen. The associations have calculated that this amount could reach one-sixth of the total debt, which would lead to massive tax debts and threaten to halt the business operations of these enterprises.
The situation is complicated by the fact that a similar provision for paying corporate income tax on a cash basis for renewable energy producers already expired on January 1, 2024. Because of this, companies are forced to include in their income the amounts not paid by the Guaranteed Buyer and pay corporate income tax on these amounts. This leads to a direct drain on working capital and significantly worsens their already difficult financial situation.
The energy community is not just stating the problem but is proposing a specific, two-step action plan that requires an immediate and coordinated response from state authorities. This is not merely a request for benefits, but a request to create conditions for the survival of a critically important industry.
The first, immediate step is to implement legislative “pain relief” to stop the financial losses faced by companies. The associations are requesting that the Cabinet of Ministers establish a clear, coordinated stance in favour of these legislative changes. This position is crucial for gaining support from the Verkhovna Rada Committee on Finance, Tax, and Customs Policy for amendment No. 69 to draft law No. 13157, which aims to extend the VAT cash accounting method until 2028. Simultaneously, the Government should propose a draft law to reinstate the cash accounting method for corporate income tax for "green" electricity producers, thereby addressing the issue of paying taxes on income that has not yet been received.
The second strategic step is to address the root cause of the disease rather than just its symptoms. The associations clearly state: “Without resolving this issue [the debts], extending the cash accounting method will have a limited effect, as it does not eliminate the root cause of the financial instability of market participants.” That is why the most important request is for the Government to develop and implement a comprehensive roadmap for settling the debts in the electricity market. This plan must be systemic, transparent, and realistic in order to restore payment discipline and improve the financial flows throughout the entire sector.
Thus, the energy community presents the authorities with a solution backed by the logic of economic expediency and national security. Ignoring these calls threatens not just the bankruptcy of individual enterprises but the destabilization of the entire national energy system, which is the foundation of the national economy and defense capabilities. The responsibility for preventing such a scenario lies entirely with the state authorities, from whom the market expects urgent and decisive action.
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