This paper reviews the design, governance and effectiveness of investment incentives in Ukraine, assessing their ability to support investment, recovery and long-term economic development while preserving fiscal sustainability. Against the backdrop of shocks related to Russia’s war of aggression against Ukraine, constrained fiscal space and evolving international tax rules, the paper examines the alignment of existing incentives with policy objectives and international good practice. Ukraine relies heavily on income-based tax incentives, particularly corporate income tax exemptions, which are often costly, weakly targeted and vulnerable to tax planning. The paper reviews key regimes – such as Diia City, industrial parks and the State Support for Investment Projects with Significant Investments – and proposes reform options to improve efficiency, equity and value for money, while supporting Ukraine’s investment and reconstruction objectives. It highlights the need to gradually phase out such instruments in favour of more targeted, expenditure-based incentives where feasible, while prioritising broader investment climate reforms. Strengthening governance, transparency and evaluation remains also essential to reduce distortions, safeguard revenues and foster a business environment conducive to inclusive and sustainable growth.
Supporting Ukraine to design and implement more efficient investment incentive policies
