Mandatory VAT introduction for sole proprietors threatens hundreds of thousands in Ukraine
Ukraine is preparing to introduce mandatory value-added tax (VAT) for sole proprietors (FOPs), which threatens to impact 170,000 to 250,000 small business owners. According to Amelin, Executive Director of the Ukrainian Institute for the Future, the reform will triple the tax burden on sole proprietors—from 7% to 20–22%. This move follows the International Monetary Fund's demands to increase tax transparency, with the government aiming to raise additional revenue by increasing taxes on FOPs.
Source NV
An FOP with an annual income of 2 million hryvnias currently pays about 140,000 hryvnias in taxes per year, but after the reform, this sum will rise to 380,000–430,000 hryvnias. As a result, approximately one-third of entrepreneurs will become VAT payers and raise prices, one-quarter will be forced to close their businesses, and 100,000 to 150,000 may move into the shadow economy.
These changes could cause a significant decline in the small business sector, reduce budget revenues due to increased informal economic activities, and worsen conditions for self-employed citizens. The future of the reforms will depend on the response from entrepreneurs and possible government adjustments.
