EU Agreement Ratified
Ukraine’s parliament, the Verkhovna Rada, has formally approved a landmark agreement with the European Union that unlocks a €90 billion loan. In return, Kyiv has pledged to roll out sweeping reforms in taxation, customs, and anti-corruption measures. Key changes include:
- Introducing VAT for individual entrepreneurs (known as FOPs);
- Imposing a new tax on parcels shipped from abroad;
- Adjusting the single tax system for the third group of entrepreneurs.
The EU will disburse the funds in installments, with a special commission reviewing Ukraine’s reform progress before each payment. These disbursements are directly linked to the country’s compliance with its commitments. Among the most notable shifts outlined in the memorandum is the removal of the current tax exemption for parcels valued under €150. Instead, such packages will face a 20% VAT and a 10% duty. The only exception applies to items worth less than €35 sent between individuals as gifts or personal belongings.
New Rules for Entrepreneurs and Taxes
Under the updated framework, individual entrepreneurs (FOPs) will be required to file VAT returns quarterly and register tax invoices monthly. Additionally, a new bill is being drafted to create a separate tax regime for individuals selling goods on online marketplaces. These sellers would pay a 5% income tax plus a 5% military levy. Foreign platforms will also be obligated to share data on Ukrainians’ earnings.
Attorney Bohdan Yankiv noted that these reforms won’t take effect overnight. Instead, they will be phased in over two to three years, depending on how well Ukraine meets its obligations. He added:
'Ukraine never fulfills 100% of its commitments under such memorandums. Typically, compliance tops out at around 70%.' Bohdan Yankiv, Attorney
Changes for the third group of FOPs will also be introduced gradually over the next few years. The memorandum adopts a Polish-style model for this group, where the single tax rate varies by business type. 'In Poland, for example, grocery stores have a lower rate while IT professionals pay a higher one,' Yankiv explained.
This ratification marks a critical milestone for Ukraine, granting access to substantial EU funding needed to drive essential reforms. However, the gradual implementation and strict conditionality highlight the challenges the country faces in overhauling its tax system and tackling corruption. It also underscores the need for sustained economic growth and alignment with European standards—a key part of Ukraine’s broader integration into the European sphere.
As Ukraine navigates these significant reforms, it's essential to consider the recent developments surrounding the tax on international parcels. The Ukrainian Parliament's recent rejection of the tax proposal highlights the complexities and challenges the government faces in implementing effective taxation policies that align with EU expectations.