VAT deferral for sole proprietors: Minister explains the government’s position
29 April 20:02
Whether the introduction of VAT for sole proprietors will be postponed until 2027 will only become clear after negotiations with the IMF conclude in late May or early June, but the option of abandoning the VAT introduction is not being considered.
This was announced by Ukrainian Finance Minister Serhiy Marchenko in response to questions from members of parliament, according to "Komersant Ukrainian".
This concerns the mandatory registration as VAT payers of “simplified tax system” taxpayers with an annual income exceeding four million hryvnias.
“It is a fact that during the spring meetings, the Prime Minister and I held discussions on this issue. We presented arguments and convincingly demonstrated to our partners that this decision is premature and we consider it necessary to postpone it,” he noted.
According to the minister, the IMF was understanding of this and “there is a sense that this issue could be revised in a positive direction in line with our needs and postponed.”
But there is no question of dropping the issue, he emphasized, responding to a follow-up question.
“The VAT issue is enshrined in the EU directive and is included in the National Revenue Strategy developed by the Ministry of Finance,” Marchenko reminded.
According to him, the government understands that this issue provokes “complex political discussions” and therefore needs to be postponed.
“I can’t go into more detail yet, but the issue of postponement will be up for discussion,” the minister said.
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How this relates to the $8.1 billion IMF program
The VAT issue for sole proprietors is being considered in the context of the new four-year Extended Fund Facility (EFF) program, which Ukraine has agreed upon with the International Monetary Fund.
This is an $8.1 billion support program intended to partially cover the projected state budget deficit. According to IMF estimates, Ukraine’s fiscal gap in 2026–2029 will amount to approximately $136.5 billion. Of this amount, $63 billion falls specifically on 2026–2027, even taking into account already confirmed international aid.
On February 26, the IMF Executive Board approved a new four-year EFF program for Ukraine, and on March 3, the country received the first tranche of $1.5 billion.
Why the issue of VAT for sole proprietors has caused such a stir
The idea of introducing VAT for sole proprietors sparked a strong reaction even during the discussion phase. When the government proposed requiring some sole proprietors to pay value-added tax, it caused a conflict between the government, parliament, and the business community.
For small and medium-sized businesses, such an initiative would mean not only an additional tax burden but also more complicated administrative procedures. That is why the issue quickly became politically sensitive and sparked widespread public debate.
It was previously reported that Ukrainian government officials and representatives of the International Monetary Fund (IMF) are in the final stages of discussing the introduction of VAT for sole proprietors in 2027. According to media reports, the provision requiring sole proprietors with income exceeding 4 million UAH to pay VAT will remain, but its implementation is planned to be postponed by one year.
Prior to that, on March 30, the Cabinet of Ministers split the IMF’s “Big Tax Law” into three draft laws: on the taxation of digital platforms, the taxation of international parcels, and the extension of the military levy. These draft laws were later adopted by the Verkhovna Rada and signed by President Volodymyr Zelenskyy.
At the same time, a bill introducing VAT for sole proprietors was not drafted. Some MPs speculated that the government might try to convince the IMF to drop this requirement.
On April 20 , Prime Minister Yulia Svyrydenko stated that Ukraine and the IMF are discussing alternatives to introducing VAT for sole proprietors to fill the budget for next year. According to her, during the spring meetings, the parties agreed that this is indeed a sensitive issue and not a constructive idea.
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