The International Monetary Fund (IMF) has approved $8 billion in aid for Ukraine over four years, but this support comes with new demands. One of these is to require all individual entrepreneurs (FOPs) with an annual income above 1 million UAH to become VAT payers. This affects 170,000 to 250,000 entrepreneurs—about one-tenth of all registered Ukrainian FOPs.
Currently, FOPs in the third tax group with an annual income of up to 2 million UAH pay about 140,000 UAH in taxes. After the reform, this amount will rise to 380,000–430,000 UAH, effectively tripling the tax burden. There will also be additional costs related to VAT administration.
By contrast, the European Union is moving in the opposite direction: from 2025, the maximum national VAT registration threshold is set at €85,000, with an intra-EU trade limit of €100,000. Ukraine proposes a threshold of €20,000, much lower than the European average.
Critics say Ukraine's VAT system is complex and unstable, even for large businesses. For small entrepreneurs, VAT brings the need for accountants, monthly VAT returns, and invoice registration. The EU has introduced simplified quarterly reporting and less administrative pressure.
Analysts argue that the reform will not impact big business but rather affect ordinary entrepreneurs who create jobs and pay taxes legally. Some business owners may close or move into the shadow economy, while others may raise prices to compensate for higher taxes, driving inflation.
Ukraine's VAT system involves strict pre-transaction controls, while Europe relies on post-audit checks. The increased number of VAT payers could overload the outdated Ukrainian system, causing delays, blocked invoices, and more difficulty for small businesses.
Experts advise introducing changes gradually and adapting Ukraine’s tax regime to European standards—such as quarterly reporting, automatic VAT refunds, transparent audit criteria, and digitalization. This approach is seen as key to preserving jobs and supporting small business growth in Ukraine.
