Obligations to the IMF
Ukraine's Ministry of Finance has proposed a new measure, set to take effect in 2027, requiring businesses using the simplified tax system to register for Value-Added Tax (VAT) if their annual turnover exceeds 1 million hryvnias. This reform is part of Ukraine's commitments under its program with the International Monetary Fund (IMF). Danilo Hetmantsev, head of the parliamentary committee on finance, tax, and customs policy, has voiced his support for the planned changes, noting that major business associations, including the American Chamber of Commerce (ACC), the European Business Association (EBA), and the Federation of Employers of Ukraine (FRU), are also in favor.
Hetmantsev acknowledged that the changes will not be welcomed by tax minimizers or by genuine small-scale individual entrepreneurs (FOPs), who often suffer from the distortions created by minimizers. He expressed an intent to protect and support small businesses during this challenging period but is currently awaiting the final proposal from the Finance Ministry. Following its submission, broad consultations are planned within his committee.
Additional IMF Requirements
Other IMF requirements include introducing a tax on digital platforms and abolishing the duty-free allowance for imported parcels valued under 150 euros. Hetmantsev also highlighted issues related to smuggling, specifically alleging that the Yabko retail chain sells contraband goods and evades taxes.
"Any reforms to the simplified tax system should not be implemented abruptly but require a transition period. This must be considered in light of the National Revenue Strategy, which outlines the timelines and approaches for reforming the system."
Danilo Hetmantsev
The proposed tax system amendments underscore Ukraine's obligations to the IMF and could significantly impact small and medium-sized enterprises. Requiring simplified-tax businesses to register for VAT may increase the tax burden for entrepreneurs currently benefiting from the streamlined system. This move highlights the government's attempt to balance fulfilling international commitments with supporting the domestic economy, a delicate task as Ukraine continues its post-war recovery. The ongoing conflict makes economic stability and business support particularly critical for national resilience.