On January 1, 2016, the Association Agreement between Ukraine and the EU came into force, according to which Ukraine should implement European Union rules on state aid. Although these rules are not intended to regulate in any way the tax policy of either EU member states or Ukraine, they limit the possibilities for applying tax incentives. Ukraine is not EU member state and for this moment has no perspective to become a member. That is why some questions arise concerning the way of state aid rules application to economic entities in Ukraine, their monitoring at the national level and consequences for Ukraine if it does not comply with these rules. The article contains a research on the peculiarities of the application of tax incentives in view of the implementation of the European state aid legislation in Ukraine. The author analyzes the European rules of state aid and their application in the tax area. The author has defined what tax measures may fall under the European law on state aid. A simplified taxation system, which is one of the most important tax incentives in Ukraine, will not fall under the rules on state aid. But the possibility of applying tax incentives for large companies will be limited. As a result of the study, it was found that the Anti-Monopoly Committee of Ukraine could have serious difficulties in stopping and returning illegal state aid. The author concludes that, in case of Ukraine's non-compliance with its state aid obligations, the most probable scenario will be long negotiations with EU and simultaneous introduction of customs duties on the relevant commodities. By 2023, Ukraine will be in a transitional period for state aid rules application, and during this time, their implementation will have a serious impact on taxation in Ukraine.
Keywords: state aid to companies, tax incentives, EU-Ukraine Association Agreement
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