Ukraine is considering a 1% VAT increase to insure businesses against war risks

Ukraine is considering raising the value-added tax rate by 1 percentage point. Additional funds may be used to finance a new multi-level system of business insurance against war risks.

The need to expand insurance coverage is explained by the scale of potential losses for enterprises due to Russian attacks. According to estimates, direct losses to fixed assets of Ukrainian businesses in 2026 could range from $4 to $10 billion.

At the same time, the Ukrainian insurance market’s ability to cover such risks remains limited.

About 17 companies insure war risks

Currently, about 17 Ukrainian insurance companies work with war risks. However, only five of them offer a sufficient selection of relevant insurance products.

In addition, Ukrainian companies transfer approximately 90% of war risks to international reinsurance.

There are also geographical restrictions. A significant part of the available insurance offers does not cover business facilities located on the left bank of the Dnieper.

The state wants to take on the most expensive part of the risk

A war risk insurance program is already operating in Ukraine, introduced by the Cabinet of Ministers Resolution No. 1541. It is administered by the Export Credit Agency.

The next step should be the creation of a multi-level insurance system.

The proposed model involves the distribution of the financial burden between the state and private insurance companies.

The state should take on the most expensive level of risk – the so-called “first loss”. This is expected to allow private insurers to work more actively with war risks and expand the list of products available to entrepreneurs.

The goal of the system is to make insurance more accessible to businesses that continue to operate in conditions of full-scale war.

VAT may be increased for financing

One of the possible sources of financing for the new system is called an increase in the VAT rate by 1 percentage point.

At the same time, there is no final decision on changing the tax yet – this option is only being considered.

Discussions are also ongoing on the cost of insurance for entrepreneurs and the mechanism by which the state and private insurance companies will distribute the financial burden between them in the event of damage or destruction of property as a result of the war.

Business losses could reach $10 billion

The issue of insurance is becoming increasingly urgent against the backdrop of Russian strikes on Ukrainian enterprises, warehouses, and other infrastructure.

According to forecasts, direct losses to fixed assets of businesses from Russian attacks during 2026 could amount to $4–10 billion.

That is why the state is looking for a model that would partially compensate for war risks and at the same time attract more private companies to their insurance.

Currently, the issue is working out the appropriate mechanism. Therefore, a possible increase in VAT by 1 percentage point is not yet a final decision.