Photo: EPA / Oleh Petrasiuk

The Ministry of Finance has announced that changes to the taxation of individual entrepreneurs will take effect no earlier than 2027 and will not automatically abolish existing VAT registration exemptions. The ministry provided this clarification in a statement published on Friday.

On 4 December, the International Monetary Fund said that Ukraine must prepare draft legislation to eliminate exemptions from mandatory VAT registration. This is one of the prior actions required for approval of a new loan programme.

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The Ministry of Finance stressed that the changes will not be introduced immediately.

"The amendments are scheduled to take effect no earlier than 2027, which provides enough time to finalise the changes, develop administrative and reporting tools, conduct public consultations and prepare businesses. This is not an automatic abolition of VAT registration exemptions, but rather the creation of a balanced approach that will both strengthen efforts to combat shadow schemes and protect bona fide small businesses," the ministry said.

The statement explains that the goal is to eliminate shadow schemes in which companies exploit the simplified tax system — designed to support small businesses — for tax evasion, aggressive optimisation, "grey imports" and smuggling.

"The government does not plan to raise basic tax rates, but will instead focus on reducing the shadow economy, improving administration and expanding the tax base. The planned reforms should ensure fairer business conditions, where entrepreneurs with similar turnover operate under the same rules and do not compete with those who use tax loopholes," the ministry added.

  • On 26 November, Ukraine and the IMF agreed on a new four-year Extended Fund Facility (EFF) worth $8.1 billion. The agreement has so far been reached at the technical level (a Staff-Level Agreement) and is expected to be approved by the Fund’s Executive Board in the coming weeks, once the state budget is adopted and sufficient financial assurances from other donors are secured.
  • To obtain the new IMF financing, the government has agreed to phase out certain tax privileges, including introducing VAT obligations for individual entrepreneurs with annual income above UAH 1 million.