Electric vehicles without tax breaks: how the return of VAT changes import prices from 2026 and what it means for the market
From January 1, 2026, one of the key tax incentives for electric vehicles in Ukraine will cease to apply the exemption from VAT on imports. The State Budget for 2026 does not contain an amendment to extend it, which means the automatic return of 20% value-added tax for all electric cars cleared through customs after December 31, 2025. The incentive had been in place for almost eight years and allowed buyers to save about 30% of the final vehicle price. This phase is now coming to an end, and the market is entering a new reality.
The tax incentive for electric vehicles was introduced at the end of 2017 and came into force on January 1, 2018. Its purpose was not limited to zero VAT, but was part of a broader approach to stimulating a new segment. Electric vehicles were granted zero import duty, which is a permanent rule with no expiration date, a minimum excise tax of 1 euro per 1 kWh of battery capacity, which on average amounts to about 100 euros, as well as a zero contribution to the Pension Fund upon first registration, whereas for vehicles with internal combustion engines this fee amounts to 3–5% of the customs value. The VAT exemption became the decisive element of this model.
Legally, the incentive is enshrined in paragraph 64 of subsection 2 of section XX “Transitional Provisions” of the Tax Code of Ukraine, which temporarily exempts from VAT operations involving the import and supply of vehicles powered exclusively by electric motors. The key word here is “temporary”. The validity period ends automatically on December 31, 2025. No decisions are required to cancel the incentive. Instead, its extension would require a separate vote in the Verkhovna Rada, the chances of which, according to the head of the Institute for Auto Market Research, Stanislav Buchatskyi, are less than 5%.
This model made it possible to create a mass market. Over several years, more than 200,000 electric vehicles were imported into Ukraine, and a full-fledged infrastructure emerged around them importers, logistics, service centers, and charging networks. In October, a record of around 13,000 electric vehicles per month was recorded, and in November–December the figure may increase to 15,000 due to attempts to complete customs clearance without VAT.
“If it weren’t for these incentives, we wouldn’t be talking today about a large electric vehicle market. The incentive gave the market a start, and everything else was done by business,” Stanislav Buchatskyi noted.
From January 1, 2026, only one element changes, but it is the most significant one. VAT at 20% on electric vehicle imports returns. All other conditions remain unchanged: import duty 0%, excise tax 1 euro per kWh, Pension Fund contribution 0%. Thus, the tax burden does not become comprehensively harsher, but the final bill for the buyer increases substantially.
This is clearly illustrated by specific examples. Let us take a typical scenario for the Ukrainian market a second-generation Nissan Leaf or a similar electric vehicle. The vehicle price abroad is $15,000, delivery to Ukraine costs $2,000, and battery capacity is 40 kWh.
Until December 31, 2025, the buyer pays $15,000 for the vehicle + $2,000 for delivery, totaling $17,000. Only the minimum excise tax is charged:
40 kWh × 1 euro = approximately $40.
Import duty 0%, VAT 0%.
The final cost amounts to $17,040. This is essentially the net import price without fiscal burden.
From January 1, 2026, the VAT base is calculated as customs value + delivery + excise tax + import duty. In this same example, the base amounts to $17,040, and 20% VAT on it equals $3,408. The final cost of the electric vehicle after customs clearance rises to $20,448.
Thus, the price increase is about 20% of the total cost including delivery. In hryvnia terms, this means that a vehicle currently costing about 715,680 UAH will cost 858,816 UAH after the return of VAT. The difference is 143,136 UAH. This amount is comparable to purchasing an inexpensive used internal combustion vehicle or several years of fuel expenses.
At this stage, it is important to fix one key point: electric vehicles do not lose all tax advantages, but they lose the main one zero VAT. It was this element that formed the basis of price accessibility.
The official explanation for not extending the incentive is budgetary needs. In wartime conditions, the state is seeking sources of budget revenues, and electric vehicle imports have become one of the largest segments. There is also a European integration factor: zero VAT contradicts EU directives. Within the framework of alignment with European legislation, Ukraine cannot maintain a zero rate on a permanent basis, although reduced rates are formally allowed.
The government’s position was publicly outlined by the head of the Verkhovna Rada Committee on Finance, Tax and Customs Policy, Danylo Hetmantsev:
“I urge everyone who has the opportunity to take advantage of the incentive to do so before it expires. The incentive will not be extended. No options.”
Against this backdrop, the market is already discussing the consequences. The forecast of the Institute for Auto Market Research suggests a drop in electric vehicle imports by 20–40% in the first quarter of 2026. Buyers will need time to adapt to the new prices. It is expected that prices for used electric vehicles in Ukraine may increase by 5–10%, but unlikely by the full 20%, as competition in the secondary market remains high.
At the same time, electric vehicles remain the cheapest to clear through customs compared to gasoline or diesel cars. Even with 20% VAT, the absence of import duty and Pension Fund contribution preserves their relative advantage. A decline in foreign auction prices by 10–15% is also possible if demand from Ukraine temporarily decreases while supply on international platforms remains high.
In the middle of this process, “Time for Action” draws attention to a systemic problem: Ukraine still lacks a coherent transport strategy. Tax policy, environmental incentives, the development of charging infrastructure, and European integration obligations exist as separate tracks that are not combined into a single model. The incentive gave the market a start, but its termination is not accompanied by a new vision for the development of electric transport.
The conclusion is simple and tough. Import duty on electric vehicles is not being introduced it remains 0%. Excise tax and Pension Fund contribution do not change. The only change from January 1, 2026, is the return of 20% VAT, which automatically increases the cost of customs clearance by approximately one fifth. This is not the end of the electric vehicle market, but the end of an era of maximum tax accessibility. For both buyers and businesses, it means making decisions in a fundamentally different price reality.
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