The Ukrainian Ministry of Finance has introduced a significant tax reform bill, which includes changes to VAT regulations for individual entrepreneurs, taxation on parcels, and other key areas. This initiative is expected to enhance the state budget by approximately 60 billion hryvnias annually and mitigate potential revenue losses from military taxes following the end of martial law.
One of the primary changes involves extending the mandatory VAT registration threshold for individual entrepreneurs with annual incomes exceeding 4 million hryvnias (around 85,000 euros) to January 1, 2027. Additionally, the bill proposes that VAT payers under the single tax system report quarterly, with minimal penalties for initial violations.
Regarding military taxes, the legislation suggests extending the payment period until the Ukrainian Parliament enacts a resolution to conclude military reforms. For individual entrepreneurs under the first, second, and fourth tax groups, a tax rate of 10% based on one minimum wage (set to be 850 hryvnias in 2026) is proposed, while the third group would see a 1% tax rate on income.
In terms of digital platform taxation, the Ministry proposes reducing the current 18% tax rate to 5%, with no tax applied if annual earnings do not exceed 2,000 euros. Notably, there will be no requirement for a bank account for reporting purposes, allowing sellers to use existing personal accounts.
The bill also addresses the taxation of parcels, introducing specific rules for remote sales of goods valued under 150 euros, which are exempt from VAT if intended for personal use and valued under 45 euros. It outlines that the responsibility for VAT collection will fall on non-resident electronic interface companies.
In February, the International Monetary Fund lifted previous conditions tied to a new $8.1 billion loan program for Ukraine, including VAT and customs requirements. Prime Minister Yulia Svyrydenko stated that all tax and customs modifications removed from prior actions will serve as structural benchmarks for future program reviews.
The proposed tax changes will be consolidated into a single comprehensive bill, known as the Beautiful Tax Bill, which aims to streamline various tax regulations. The new VAT threshold for individual entrepreneurs is expected to significantly reduce the number of affected small businesses from 660,000 to 257,000.
The Beautiful Tax Bill is anticipated to be submitted to the Parliament in March, although the Prime Minister noted that securing the necessary votes remains a challenge.
Ukraine's Ministry of Finance has introduced a comprehensive tax reform bill aimed at increasing budget revenues and addressing various taxation issues. The proposed changes include adjustments to VAT for individual entrepreneurs, military tax extensions, and new rules for digital platforms and parcel taxation.