Ukraine's Finance Ministry Proposes Sweeping Tax Reform Bill: Key Changes for Entrepreneurs and Online Shoppers

Proposed Amendments to the Tax Code

According to Главком: The Ukrainian Ministry of Finance has submitted a draft law proposing significant amendments to the Tax Code and banking legislation. This comprehensive bill introduces major changes, including new rules for the international exchange of income data from digital platforms, revised taxation for e-commerce, and modifications for individual entrepreneurs (FOPs) concerning Value Added Tax (VAT) and the single tax. Additionally, the draft law extends the validity of the military levy. These reforms are part of Ukraine's broader efforts to modernize its fiscal system and meet international obligations.

Key Provisions

A central feature of the bill is the implementation of international information exchange on income earned through digital platforms, aimed at ensuring greater transparency for online earnings. For e-commerce, the proposed changes include lowering the income tax rate on revenue from digital platforms from 18% to 5%. No tax will be applied if annual income does not exceed the equivalent of €2000. From January 1, 2027, individual entrepreneurs on the simplified system with an annual income exceeding 4 million UAH will be required to become VAT payers, a key demand from the International Monetary Fund (IMF).

FOPs who become VAT payers will have a quarterly reporting period. For the first five violations within a year, a symbolic fine of 1 UAH is stipulated. Regarding the single tax, the bill proposes setting it at 10% of one minimum wage (projected to be 850 UAH in 2026) for payers in the first, second, and fourth groups. For third-group single tax payers (excluding e-residents), a rate of 1% of income is proposed.

The legislation also introduces a simplified taxation scheme for imported parcels with a total value not exceeding €150. Parcels valued under €45 for personal or family use will be exempt from VAT. The norms concerning international information exchange and the new e-commerce taxation rules are scheduled to take effect on January 1, 2027. Meanwhile, the extension of the military levy will continue for the duration of martial law and until the completion of the reform of the Armed Forces of Ukraine (AFU).

Recall that on March 10, the Verkhovna Rada considered tax bill 14025. The vote on the draft law concerning the implementation of international automatic information exchange received 168 votes from deputies, falling short of the required minimum of 226.

Ukraine is expected to adopt this package of tax measures by the end of March 2026, in line with IMF requirements.

The proposed tax amendments form part of Ukraine's commitments to international financial institutions, particularly the IMF. Implementing international data exchange and new taxation rules could enhance the transparency of financial flows and help combat tax evasion, which is a crucial step for the country's economic stability. The changes outlined in the draft law will significantly impact small and medium-sized businesses, especially individual entrepreneurs who are a vital component of the Ukrainian economy.

The proposed tax reforms come in the wake of the IMF's insistence on implementing VAT for individual entrepreneurs, as Ukraine's unified tax revenue has reached 60 billion UAH. This demand highlights the need for compliance with international standards and the importance of sustainable fiscal policies. For further insights into the IMF's position and its implications for Ukraine's small business sector, read more about the VAT requirements for sole traders.