From 2027, VAT will be introduced for individual entrepreneurs: how it will affect prices and businesses.

According to ТСН: Individual entrepreneurs (IE) will face new challenges, as new taxes are introduced starting from January 1 of next year, and some benefits for small businesses will be abolished. The most important thing is that from 2027, all IEs, like large and medium-sized enterprises, will have to start paying value-added tax (VAT). The Ministry of Finance recently presented a draft law that anticipates changes in the tax system.

More IEs of good and diverse

As of October 1, 2025, there are 1 million 774 thousand IEs of all taxation categories in Ukraine. This means that over 4 million families, or 12-13% of Ukrainians, depend on their activities.

IEs are divided into two main categories: VAT payers and simplified taxpayers. The latter constitutes the majority - about 1.6 million or up to 90% of all IEs. Simplified taxpayers are divided into four groups depending on annual income.

• Group 1 of IEs - up to 1 million 336 thousand hryvnias. This mainly includes sellers at markets and providers of household services. Taxes in this group amount to 2862.8 UAH per month.

• Group 2 - up to 6 million 672 thousand hryvnias. This includes owners of small shops, cafes, and workshops. Average tax expenses are 4160 UAH per month.

• Group 3 - up to 9 million 336 thousand hryvnias. This is the largest group engaged in large-scale trade and provision of professional services. Tax obligations include fixed ESВ and income taxes.

• Group 4 - for family farming households that sell products of their own production.

What will change from January 1, 2026, for all IEs

The increase in taxes will be influenced by the increase in social standards, which will take place from January 1, 2026. As a result, new tax amounts will emerge for each IE group.

• Group 1 - the new tax will amount to 3091.14 UAH per month, the maximum income will rise to 1 million 444 thousand hryvnias.

• Group 2 - the tax will increase to 4496.44 UAH per month, annual income - up to 7 million 211.6 thousand hryvnias.

• Group 3 - the ESВ will reach 1902.34 UAH, annual income will go up to 10 million 91 thousand hryvnias.

Why VAT is being introduced for simplified IEs

The draft law of the Ministry of Finance anticipates VAT payment by all IEs with an annual income exceeding 1 million hryvnias. The main reasons for introducing VAT include:

• harmonization with European standards;

• filling the state budget;

• creating equal conditions for competition;

• fighting smuggling;

• countering tax minimization through business fragmentation.

The head of the secretariat of the Entrepreneurs' Council, Andriy Zablovsky, notes that the introduction of VAT is not economically justified in the context of war and may lead to the destruction of small enterprises.

How "VAT for all" will affect prices

According to estimates, the introduction of VAT will lead to price increases, especially in groups 1 and 2 of simplified taxpayers. The first group may raise product prices by 15-20%. For the second group, the price increase may reach 10-15% due to new tax obligations.

The prices for freelance services will increase the most, by 18-20%, since they do not have access to "input" VAT. At the same time, market participants are trying to optimize their costs according to new requirements.

Thus, changes in the tax policy for IEs, which will come into effect in 2026, may significantly impact the situation in small businesses in Ukraine. The reaction of entrepreneurs to the new regulations and their possible consequences will be important issues that will be monitored in the coming years.