Ukraine plans to lower the annual revenue threshold for mandatory VAT registration to 1 million UAH for small entrepreneurs starting in 2027. This will affect around 660,000 sole proprietors, nearly 40% of all formally registered small businesses in the country.
The draft legislation stipulates that all entrepreneurs on the simplified tax system with an annual turnover above 1 million UAH will become VAT payers. The Ministry of Finance expects additional revenues of 40 billion UAH per year for the state budget. However, experts criticize the new law, arguing that the real administrative burdens for business have been greatly underestimated and contain significant analytical miscalculations.
For instance, the Ministry estimates the time spent by a business owner on VAT administration at just 56 hours per year, but World Bank data show an average of 595 hours, with Ukrainian analytical centers reporting even higher numbers. The actual cost for qualified accounting services is also far above the government forecast. Total costs for VAT administration may reach 61–115 billion UAH annually.
By comparison, VAT thresholds in EU countries are much higher: France – €85,000 (over 4 million UAH), UK – £90,000 (over 5 million UAH). The introduction of a low VAT threshold in Ukraine could lead to widespread business closures or structural splitting, with the administrative burden falling on ordinary small businesses.
The ministry states that the reform is a requirement for a new IMF funding program. Yet, experts urge authorities to focus on addressing the shadow economy in areas such as imports and excisable goods, where much larger revenues can be raised, instead of targeting microbusinesses.
The draft law is still under discussion. Business associations and economists urge the government to properly assess the real costs for small businesses and avoid measures that could severely disrupt entrepreneurship or raise prices for consumers.