New requirements for individual entrepreneurs in Ukraine
Over 660 thousand individual entrepreneurs in Ukraine will be required to pay value-added tax (VAT) if their annual income exceeds 1 million hryvnias. This innovation is stipulated in the bill presented by the Ministry of Finance on December 18. The requirement to pay VAT is part of the conditions necessary to receive a financing program from the International Monetary Fund (IMF) for 8 billion dollars.
Number of individual entrepreneurs and new rules
According to data, there were 1.76 million individual entrepreneurs working under the simplified taxation system in Ukraine in 2024. Of these, 660.2 thousand individual entrepreneurs earned over 1 million hryvnias, accounting for almost 37.5% of the total number of entrepreneurs under the simplified system. According to the new rules, entrepreneurs in groups 1-3 of the simplified system will be required to register as VAT payers.
The introduction of VAT is estimated to bring additional revenues to Ukraine's budget of 40.1 billion hryvnias per year. However, administering VAT will cost each entrepreneur approximately 2.7 thousand hryvnias annually. This may become an additional financial burden for entrepreneurs who are already facing various challenges.
In particular, among those subject to the new rules, the following can be highlighted:
- 6 thousand entrepreneurs in group 1,
- 371.4 thousand entrepreneurs in group 2,
- 250.6 thousand entrepreneurs in group 3 who pay 5%.
At the same time, there are already 32.2 thousand entrepreneurs in group 3 who are VAT payers. According to the bill, the new rules will come into effect on January 1, 2027.
Thus, these changes could significantly impact the financial activities of a considerable number of entrepreneurs in Ukraine, leading to new challenges in taxation and administration. Importantly, the innovations aim not only to secure financing from the IMF but may also create additional difficulties for entrepreneurs already facing economic hardships due to the unstable situation in the country.