Hetmantsev proposes a 50% profit tax for banks in 2026

Hetmantsev has proposed to raise the corporate income tax rate for banks to 50% in 2026—one of the most widely discussed fiscal initiatives this fall, positioned as a key source of state budget revenue amid wartime conditions. Below is a comprehensive analysis of the drivers, details, expectations, and risks of this tax decision for the state, banking sector, and the economy as a whole.

Essence of the Initiative
Draft Law No. 14097 provides for a temporary (only for 2026) increase in the corporate income tax rate for banks to 50% from the current 25%. Additionally, it proposes to prohibit the use of loss carryforwards when calculating tax liability. With this, the state expects to raise about UAH 30 billion in extra revenue to cover critical budget expenditures under martial law.

Logic of the Bill’s Author
According to Danylo Hetmantsev, head of the VR Committee on Finance, this initiative is an exceptional and compelled response to unprecedented fiscal challenges and the need for sustainable defense funding. Hetmantsev noted that the banking sector has posted record profits in recent years, even as the effective tax rate dropped—from 8.1% in 2024 to 7.4% in 2025. The state has already used extraordinary measures to raise rates for banks in 2023–2024, but intends to keep the base rate in 2025 and is pre-announcing the hike for 2026.

Budget Impact
The main aim is to boost the state budget by UAH 30 billion owing to record sectoral profits, which is a critical source during war. A substantial share of these revenues will be used for defense, social programs, and macroeconomic stabilization. The imperative to replenish the budget was the main argument in choosing banks for additional taxation.

Predictability and Limits of the Initiative
Unlike in previous years, the increased rate is not being imposed retroactively, and is being announced in advance—giving banks time to adjust business models and update planning. According to Hetmantsev, predictable tax policy builds business trust by ensuring transparency of fiscal rules.

Critics’ Arguments
Immediately after the announcement, representatives of the banking sector and the financial community voiced several concerns. Major risks include:

• Excessively high taxation could undermine banks’ motivation to invest in development, and lead to reduced lending and innovation.
• Outflow of some bank profits abroad, reduction of dividends to shareholders who already face higher risks.
• Prolonged extraordinary rates might damage the Ukrainian banking sector’s attractiveness to foreign investors, especially given intensifying competition in financial services.

State of the Banking System
Ukrainian banks, despite the war, continue to report rising profits due to increased interest income and stabilization actions by the NBU and Cabinet. Yet, some institutions remain loss-making, and profits are unevenly distributed—state-owned and leading market banks generate the bulk of windfall profits.

Market and Economic Impact
Potential effects include:

• Extra budget inflows to cover defense, which is an unconditional priority.
• In the short term, high-profit banks can adapt to new terms, but in the medium term, lending policies may change—especially for SMEs and low-margin sectors.
• High rates remain for 2026 only, but removing retroactivity doesn’t exclude the risk of “prolonged” emergency taxes if martial law persists.

International Context
Other countries under similar circumstances have used emergency taxation on bank and energy company profits (notably during the pandemic or energy crises). International practice supports such tools in wartime or times of catastrophe, but always emphasizes time limits and decision transparency.

Balancing Interests
The main challenge is balancing fiscal needs with sustaining banks’ incentives for innovation, lending, and servicing the economy. Record sectoral results strengthen the arguments for the policy, but the risks of reduced long-term attractiveness and slowed financial system growth remain.

Adoption Prospects
As of October 2025, the draft law has only been tabled in Parliament; consultations with experts and bankers are ongoing. It will likely spark intense debate. The main arguments in support are the temporary, wartime, critical nature and a potential UAH 30 billion gain for the budget.

Conclusion
Hetmantsev’s 50% tax for banks in 2026 is a classic example of fiscal compromise in wartime—an exceptional, temporary budget measure targeting a sector with windfall profits in difficult times. The real impact will only be clear after the law is adopted, while the question of balancing state interests and stable financial sector growth will remain open for public oversight and expert debate.

Author: Ihor Yasko, Managing Partner of WINNER Law Firm, PhD in Law

If you have questions or issues regarding bank profits taxation, new legislative initiatives, or need to assess the impact on banking business and financial planning, contact the lawyers and experts at WINNER Law Firm.