No VAT for sole proprietors yet: IMF eases conditions for Ukraine
14 February 09:15
The International Monetary Fund has made an unprecedented decision to cancel the preconditions for Ukraine’s new $8.1 billion loan program. These preconditions included VAT requirements for sole proprietors, customs duties on parcels, a tax on digital platforms, and a military levy.
This was announced by Ukrainian Prime Minister Yulia Svyrydenko during a conversation with journalists, according to "Komersant Ukrainian" with reference to RBC-Ukraine.
“Currently, there are no prior actions for obtaining the program. We expect that the issue of Ukraine will be raised at the next meeting of the IMF Board of Directors at the end of February,” she said.
It should be noted that this is the first case in the history of Ukraine’s cooperation with the IMF when the need to implement prior actions and transfer these conditions to the status of structural benchmarks was canceled. Usually, the opposite happened – benchmarks were transferred to the status of prior actions due to their non-fulfillment.
According to the prime minister, the conditions for receiving the program were changed as a result of negotiations with the IMF after the visit of the Fund’s head, Kristalina Georgieva, to Kyiv. As agreed with the Fund, all four preconditions must be fulfilled after the IMF’s board of directors approves the new program.
What will these changes bring?
The cancellation of prior actions allows the Fund’s Board of Directors to make a decision on lending to Ukraine at one of its upcoming meetings. As a result, a few days after such a decision, Ukraine may be allocated the first tranche of the loan program. According to Svyrydenko, it is expected to amount to $1.5 billion.
The new program also allows the EU to allocate a loan of €90 billion for 2026-2027. According to Svyrydenko, Ukraine hopes that in 2026, it will be able to receive $60 billion of this amount — preliminarily $15 billion for the budget and $45 billion for military needs, and in 2027 — $30 billion (with $15 billion allocated to the budget and $15 billion to military needs).
“This issue, as well as how and when the money will be allocated, is currently being discussed,” she said.
Svyrydenko stressed that the development of a financial strategy is currently on the agenda.
“The Ministries of Finance and Defense are working to clarify defense and budgetary needs. Once finalized, these calculations will be forwarded to partners, allowing financing to begin as early as April. This is particularly important for ensuring defense and critical budgetary expenditures,” the prime minister said.
Tax changes will be combined into a single bill
As Svyrydenko noted, all tax and customs changes that have been removed from the category of prior actions will become structural benchmarks that must be met for the next review of the program.
To this end, bills on digital platforms, taxation of parcels, extension of the 5% military levy, and the introduction of VAT for sole proprietors will be combined into one large bill (the Beautiful Tax Bill).
Regarding VAT for sole proprietors, an agreement has been reached that the ceiling for its application will be increased from 1 to 4 million hryvnia. Thus, it will no longer affect 660,000 small businesses, but 257,000.
The date of introduction of VAT for sole proprietors is still being discussed with the IMF. According to Svyrydenko, it could be either 2028, or the tax will come into effect when Ukraine joins the EU.
The new Beautiful Tax Bill will have to be adopted in March. But so far, according to the prime minister, there are not enough votes in the Rada for this.
“Our partners expect us to adopt these changes in the first reading and as a whole in March. But we are being honest: the situation with votes in parliament is complicated. We have held a significant number of meetings with factions and are working in coordination formats,” Svyrydenko said.
She noted that against the backdrop of security challenges and the burden on society, any tax changes are perceived very sensitively, and tax changes are not only a matter for the government, but also “the joint responsibility of parliament and all branches of government to society.”
Why the IMF softened its conditions
According to Svyrydenko, the IMF agreed to soften the conditions for receiving the new program due to significant changes in the situation in Ukraine as a result of the shelling of energy facilities.
“The situation has changed significantly compared to what it was in November, when we were working with the IMF mission on drafting the program,” she said.
Media sources familiar with the negotiation process said that the key event that led to the IMF’s change of position was the visit to Kyiv by the Fund’s head, Kristalina Georgieva, in mid-January. “The main thing is that Georgieva saw Kyiv as dark, cold, but unconquered,” the publication’s interlocutor noted.
During her visit to Ukraine, the IMF chief had the opportunity to inspect the energy infrastructure that had been damaged by Russian strikes.
