IMF demands VAT from millionaire entrepreneurs: does this pose a threat to small businesses.

According to ТСН: Discussions continue in Ukraine regarding the possibility of implementing Value Added Tax (VAT) for individual entrepreneurs (FOPs). The Verkhovna Rada emphasizes that this issue will be postponed until the state of war is over, however, the Ministry of Finance advocates for its introduction.

Experts and analysts express concern as such changes may negatively impact Ukrainian businesses, lead to the closure of FOPs, and reduce jobs.

Implementation of VAT for FOPs: Ukraine's agreement with the IMF

Ukraine and the International Monetary Fund (IMF) have reached a preliminary agreement to launch a new financial support program worth $8.2 billion. Prime Minister of Ukraine Yulia Svyrydenko stated that these funds will help cover crucial government expenditures and ensure economic stability.

To receive financial assistance, Ukraine needs to fulfill several conditions outlined in the agreement with the IMF. Among the key commitments are: a strategy for restructuring public debt and strengthening the fight against tax evasion.

Key areas where action should be taken:

• preventing tax evasion;

• increasing transparency in public tenders;

• removing loopholes in labor legislation;

• extending the tax burden on sales through digital platforms;

• abolishing tax privileges for VAT payer registration;

• closing loopholes for evading customs duties.

As part of the agreement, the government plans to require self-employed entrepreneurs with annual income over one million hryvnias to pay VAT. This aims to close loopholes that large companies use to reduce tax deductions.

Position of the Verkhovna Rada

Chairman of the Verkhovna Rada Committee on Financial Issues Danilo Hetmantsev called not to make changes to the tax conditions for FOPs under the simplified taxation system. He noted that business associations advocate for maintaining the existing taxation model until the war is over.

At the parliamentary faction meeting, it was decided to suspend the consideration of the initiative regarding a possible review of FOP working conditions, including the introduction of VAT. This issue has currently been removed from the agenda due to the lack of sufficient votes.

Ministry of Finance and taxation changes

Finance Minister Serhiy Marchenko emphasized the inevitability of changes in the simplified taxation system, as the goal is to level the playing field for different categories of taxpayers and eliminate opportunities for tax evasion.

Changes, he said, are expected in 2027, which will give entrepreneurs time to adapt.

Impact of the IMF agreement on Ukrainians and businesses

Yaroslav Zheleznyak emphasized that the agreement with the IMF will affect Ukrainians, particularly when selling goods online. Economist Oleg Hetman pointed out that abolishing tax privileges for VAT payer registration could negatively impact small businesses.

Financial analyst Andriy Shevchishin warned of a possible increase in prices for goods and services due to the implementation of VAT, as well as the need to hire accountants for VAT administration.

Experts' concerns

The economic expert platform expressed concern that Ukraine's obligation to abolish tax privileges for VAT payer registration could significantly negatively impact FOPs. Analysts believe that such a policy could lead to the closure of many FOPs and an increase in the shadow economy.

Experts call for phased actions, first addressing systemic issues that cost the country hundreds of billions of hryvnias annually.

The Vice-President of the Chamber of Commerce and Industry of Ukraine noted that many initiatives presented as 'IMF requirements' are, in fact, proposals from the Ukrainian authorities.

Thus, the question of implementing VAT for FOPs remains in the spotlight, but currently, the decision on changes has been postponed. In the conditions of war and economic instability, it is essential to take a cautious approach so as not to harm small businesses that already face numerous challenges.