On 1 July 2025, Ukraine’s leading energy associations, in particular the Ukrainian Wind Energy Association, the European-Ukrainian Energy Agency, the Ukrainian Association of Renewable Energy and the Solar Energy Association of Ukraine, sent an urgent appeal addressed to the Prime Minister of Ukraine Denys Shmyhal, the Minister of Energy Herman Halushchenko and the Head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy Danylo Hetmantsev, in which they called for the urgent resolution of a taxation-related issue that could significantly affect the entire energy market of the country amid war and a financial crisis.
The essence of the problem: The threat of abolishing the cash-basis method
The central issue is a temporary provision of the Tax Code (paragraph 44 of subsection 2 of section XX), which allows energy companies to determine their VAT tax liabilities on a cash basis. In simple terms, companies pay VAT not at the moment of supplying electricity, but only after receiving real money for it. This mechanism is an effective tool for balancing financial flows and minimising risks, especially in conditions where the market is suffering from multi-billion chain debts.
The validity of this provision expires on 1 January 2026. An attempt to extend it until 2028 through amendment No. 69 to draft law No. 13157 is currently blocked. As the associations note, the relevant Verkhovna Rada committee did not support this initiative due to the absence of an official position on the part of the Cabinet of Ministers. Such uncertainty creates enormous risks for all market participants and has a negative impact on the investment climate in the energy sector.
The scale of the debt crisis
To emphasise the criticality of the situation, the associations cite up-to-date data on debt in the market. As of June 2025, the overall situation looks as follows:
The debt of NPC Ukrenergo to the SE “Guaranteed Buyer” for the service of supporting “green” generation amounts to UAH 16.544 billion. As a consequence, the “Guaranteed Buyer” itself was able to settle with renewables producers for 2022 only at the level of 64.2%. A better state of settlements is observed for 2023 – 99.2%, and for 2024 – 88.9%.
The debt of NPC Ukrenergo to participants in the balancing market reaches almost UAH 13.9 billion.
A double blow to producers
If the cash-basis method is not extended, from 1 January 2026 producers will be forced to charge and pay VAT on the entire amount of electricity that has been supplied but not paid for. This means they will have to pay taxes on money they have not seen. The associations have calculated that this amount could reach one sixth of the total debt, which would lead to the mass formation of tax debts and threaten to halt the economic activity of enterprises.
The situation is complicated by the fact that an analogous provision regarding the payment of corporate income tax on a cash basis for renewables producers already ceased to apply on 1 January 2024. Because of this, companies are forced to include in their income the amounts that the “Guaranteed Buyer” has not paid them, and to pay income tax on them. This leads to the direct draining of working capital and significantly worsens their already difficult financial situation.
A call to action: The responsibility of the authorities and the future of the power system
The energy community is not merely stating the problem, but proposing a specific, two-stage action plan that requires an immediate and coordinated response from the state authorities. This is not just a request for benefits, but a demand to create conditions for the survival of a critically important industry.
The first, urgent step is a legislative “painkiller” that must stop the financial bleeding of enterprises. The associations demand that the Cabinet of Ministers provide a clear, agreed position in support of the legislative changes. This position is the key that will allow the Verkhovna Rada Committee on Finance, Tax and Customs Policy to support amendment No. 69 to draft law No. 13157 on extending the cash-basis method for VAT until 2028. At the same time, the Government must initiate a draft law on the restoration of the cash-basis method for income tax for producers of “green” electricity, thereby eliminating the tax injustice whereby taxes are paid on funds that have not been received.
The second, strategic step is to treat the root cause of the illness, and not just its symptoms. The associations clearly emphasise: “Without resolving this issue [of debts], the extension of the cash-basis method will have a limited effect, as it does not eliminate the root cause of the financial instability of market participants”. That is precisely why the most important demand is the development and implementation by the Government of a comprehensive roadmap for repaying the debt on the electricity market. This should be a systematic, transparent and realistic plan that will restore payment discipline and improve the financial flows throughout the entire sector.
Thus, the energy community is presenting 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 destabilisation of the country’s entire power system, which is the foundation of the national economy and defence capability. The responsibility for preventing such a scenario lies entirely with the state authorities, from whom the market expects urgent and decisive action.
