Will there be VAT for sole proprietors: the Cabinet of Ministers has made a new statement
13 February 15:03
In February, the Cabinet of Ministers of Ukraine will not submit a draft law on the introduction of value added tax (VAT) for individual entrepreneurs to the Verkhovna Rada. At the same time, the government continues consultations on possible changes to the taxation system for individual entrepreneurs, which are part of Ukraine’s commitments to the International Monetary Fund under the new cooperation program.
This was announced during question time in parliament by Ukrainian Prime Minister Yulia Svyrydenko in response to a question from MP Yaroslav Zheleznyak, according to "Komersant Ukrainian".
The government has postponed the submission of a draft law on VAT for sole proprietors
According to Yulia Svyrydenko, the government does not plan to submit the relevant bill to parliament in February.
“In February, the government will not submit a bill, as you say, on the threshold for sole proprietors for VAT,” the prime minister said.
This means that in the near future, individual entrepreneurs will operate under the current taxation system without new requirements for mandatory VAT payments.
Why the issue of VAT for sole proprietors is important
The introduction of VAT for sole proprietors is one of the items being discussed as part of Ukraine’s new cooperation program with the International Monetary Fund. This is a $8.1 billion financial support program that includes tax reforms and broadening the tax base.
The VAT rate in Ukraine is 20%, and its application to individual entrepreneurs could significantly change the conditions for doing business, especially for small businesses.
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What turnover threshold could be set for VAT payment
Previously, the government considered various options for the annual turnover threshold above which individual entrepreneurs would have to pay VAT:
- initially, a threshold of UAH 1 million in annual turnover was discussed;
- later, they began to consider raising the threshold to UAH 2 million per year.
This approach assumes that small businesses with lower turnover will not be subject to the new tax requirements.
The government is consulting with entrepreneurs
Sources familiar with the state of budget financing told Ekonomichna Pravda that Ukraine’s international financing could run out as early as April. If Ukraine does not receive funds from the EU by that time, there may be problems with financing some budget programs.
The government is currently consulting on a draft law on VAT for sole proprietors. Initially, the requirement was that all sole proprietors with a turnover of more than UAH 1 million would become VAT payers. However, this threshold may now be increased to UAH 2 million.
The government is also discussing the possibility of abolishing tax invoice blocks for sole proprietors and simplifying the administration of this tax for them.
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VAT for entrepreneurs
On December 18, 2025, the Ministry of Finance published for discussion a draft law on the registration of single tax payers, which are sole proprietors of groups 1-3, as VAT payers if they reach a volume of taxable transactions of UAH 1 million, which is one of the prior actions for the new International Monetary Fund (IMF) financing program.
The Ministry of Finance proposed to introduce VAT for groups 2 and 3 individual entrepreneurs from January 1, 2027. At the same time, business representatives criticized this idea.
Entrepreneurs emphasized that the new rules would lead to an additional burden. In particular, there is a need for accounting, administration, and reporting, and there are also risks of fines in the future and cash flow gaps. This will ultimately affect the price for the consumer. In addition, a petition calling for the initiative to be withdrawn gathered 25,000 signatures.
In mid-January, think tanks appealed to President Volodymyr Zelensky, Prime Minister Yulia Svyrydenko, Finance Minister Serhiy Marchenko, Minister of Economy, Environment, and Agriculture Oleksiy Sobolev, as well as the heads of the parliamentary tax and economic committees. They called for a review of the draft law on mandatory VAT registration for small businesses and for the registration threshold to be set at UAH 6 million.
What risks can VAT pose for small businesses?
Experts note that the introduction of VAT for sole proprietors can have both positive and negative consequences.
Possible risks:
- increased tax burden on entrepreneurs;
- complication of accounting;
- risk of closure of some small businesses;
- increase in prices for goods and services.
At the same time, the introduction of VAT may contribute to the de-shadowing of the economy and create more transparent conditions for competition.
What the government’s decision means for sole proprietors now
The Cabinet of Ministers’ decision not to submit the bill in February means that:
- the new rules will not be introduced in the near future;
- entrepreneurs can continue to operate under the current taxation system;
- the final decision on VAT for sole proprietors has not yet been made.
The government will continue consultations and may return to this issue later.
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