Decentralization processes which take place in Ukraine have fueled discussion about reconsideration and better explanation of the fundamentals of implementing the policy of financial support for the regional and local development that will contribute to establishment of financially capable territorial communities in Ukraine.

In the process of the research, the authors studied theoretical principles of the category formation, and practical aspects of establishment of the financial capacity of the territorial communities in Ukraine. The work describes institutional base of fiscal decentralization, identifies sources of revenues of territorial communities and methods to attract funding. The article considers criteria of financial capacity assessment, which are obtained from the data of financial and budget reports. The authors provide analysis of the dynamics of changes in the amount of local and national budgets which demonstrates growth of the nominal amount of revenues to local budgets under simultaneous reduction of their share in the national budget. Values of the main financial indicators of territorial communities during the war period in 2022 prove reduction of financial capacity of the majority of communities in Lviv region. It is found out that in the structure of the territorial communities’ budgets, a large share is taken by tax revenues and official transfers from the budget. The share of non-tax revenues is small and is getting down.

The authors provide recommendations for the bodies of state power and local government that will contribute to an increase of the communities’ financial capacity.

Results of the research can be used when the strategies for the territorial community development in Ukraine are shaped.