VAT for individual entrepreneurs from 2027: Ministry of Finance presented a draft law and explained changes for businesses
Kyiv • UNN
The Ministry of Finance of Ukraine has published a draft law on the introduction of VAT for individual entrepreneurs from 2027, which is intended to improve VAT administration for single tax payers. The changes envisage a reduction of the single tax rate from 5% to 3% for the 3rd group of individual entrepreneurs who reach the limit of UAH 1 million, and mandatory registration as a VAT payer.
The Ministry of Finance of Ukraine has published a draft law on what it calls "VAT for individual entrepreneurs" from 2027, which, according to the Ministry of Finance, "should improve VAT administration for single tax payers," UNN writes.
Details
"We understand that any tax changes cause concern, so we emphasize: the implementation is proposed no earlier than January 1, 2027. We have time to jointly develop a high-quality, fair solution that will work for the country's defense, and not for shadow schemes," the Ministry of Finance stated, noting that they are submitting the project for public discussion.
The text of the draft law, explanatory note, and regulatory impact analysis are available in the section "Draft regulatory acts for discussion in 2025" on the Ministry of Finance website.
"The purpose of the draft law is to make the rules the same for businesses with similar turnovers, to limit the use of the simplified system for aggressive optimization, business fragmentation, 'gray imports' and smuggling, while protecting honest small businesses," the Ministry of Finance said.
What exactly is proposed
The Ministry of Finance indicated that they analyzed the draft law and selected the most important details:
- time for preparation. The law will come into force only on January 1, 2027. This gives businesses and the state enough time to set up processes and transition without stress;
- change of rate for group 3. If you are in group 3 (5%) and reach the limit of UAH 1 million, you will become a VAT payer, and your single tax rate will decrease from 5% to 3%;
- exception for e-residents. The requirement for mandatory VAT payer registration does not apply to single tax payers of group III - electronic residents (e-residents);
- digitalization. Registration and reporting will take place online. The software will be updated for convenient submission of reports through the "Electronic Cabinet";
- in the explanatory materials to the draft law, special attention is paid to simplifying reporting, electronic document management, and reducing the risks of abuse by regulatory bodies due to clearer norms of the Tax Code.
Why is this needed?
The Ministry of Finance listed several points why this is needed:
- fairness. Currently, large players often use the simplified system for "fragmenting" businesses, gaining a competitive advantage over those who honestly pay VAT;
- fight against smuggling. VAT makes the sale of illegally imported goods unprofitable, because VAT payers need official tax credit ("white" documents for goods);
- support for the Armed Forces. According to calculations, this will allow an additional UAH 40 billion per year to be raised for the budget, which will be directed to financing security and defense.
"The Ministry of Finance invites all interested parties to carefully review the documents and submit specific, reasoned proposals so that the new rules are as fair and convenient as possible for conscientious small businesses," the ministry said.
What they say in parliament
"As I said, the Ministry of Finance has published a draft law on the introduction of VAT for individual entrepreneurs from 2027," explained the essence of the project by People's Deputy from the tax committee Yaroslav Zheleznyak on social networks.
According to him, the draft law, by amending the Tax Code of Ukraine, proposes "the establishment from January 1, 2027, of the obligation to register as a value added tax payer with the controlling body for individual entrepreneurs if the total amount of operations for the supply of goods / services within the last 12 calendar months collectively exceeds UAH 1,000,000 (excluding value added tax)".
"Then, by January 15, 2026, the government will submit a draft law (this will be the fulfillment of the IMF's prior action) and will push for its adoption by the end of March 2026 (this will already be an IMF beacon)," Zheleznyak said.