EBA proposes taxation changes for electricity market participants

02/ 04/ 2025

The electricity market continues to experience significant financial imbalances and difficulties in settlements. The accumulation of substantial debts within the market has been driven by the special obligations imposed on certain market participants, coupled with a low level of payments—particularly from state-owned and municipal enterprises, companies operating in combat zones, and the general population for consumed utility services. Debts are also accumulating towards renewable energy producers. The tariffs for electricity transmission set in recent years have failed to cover the costs of settlements with RES producers. The accumulated debt creates additional pressure on electricity market participants and financial strain in ensuring payments under the green tariff. To prevent further financial burdens on the energy sector, experts from the European Business Association propose the following taxation amendments for market participants: Extending the application of the cash-based VAT accounting method for electricity market participants until 1 January 2028. Current legislation allows electricity market participants to apply the cash-based VAT accounting method until 1 January 2026. However, as EBA member companies note, the reasons for adopting this provision remain relevant, and the electricity market situation requires the continuation of this taxation mechanism. The outstanding debt in the RES sector remains a critical barrier to the timely payment of VAT. Renewable energy producers do not receive funds on time, making it impossible to pay VAT without actual payment receipts. Therefore, the cash-based method should be maintained. Introducing a cash-based corporate income tax accounting method for RES producers until 1 January 2028 to address outstanding debt from previous years. The European Business Association has submitted these proposals to the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine. We hope for due consideration of our appeal to stabilise the electricity market during this extraordinary period.

Debts are also accumulating towards renewable energy producers. The tariffs for electricity transmission set in recent years have failed to cover the costs of settlements with RES producers. The accumulated debt creates additional pressure on electricity market participants and financial strain in ensuring payments under the “green” tariff.

To prevent further financial burdens on the energy sector, experts from the European Business Association propose the following taxation amendments for market participants:

Extending the application of the cash-based VAT accounting method for electricity market participants until 1 January 2028.

Current legislation allows electricity market participants to apply the cash-based VAT accounting method until 1 January 2026. However, as EBA member companies note, the reasons for adopting this provision remain relevant, and the electricity market situation requires the continuation of this taxation mechanism.

The outstanding debt in the RES sector remains a critical barrier to the timely payment of VAT. Renewable energy producers do not receive funds on time, making it impossible to pay VAT without actual payment receipts. Therefore, the cash-based method should be maintained.

Introducing a cash-based corporate income tax accounting method for RES producers until 1 January 2028 to address outstanding debt from previous years.

The European Business Association has submitted these proposals to the Verkhovna Rada of Ukraine and the Cabinet of Ministers of Ukraine. We hope for due consideration of our appeal to stabilise the electricity market during this extraordinary period.