Ukrainian Government Delays VAT Bill for Sole Traders Beyond February.

Plans for VAT on Sole Traders Postponed

According to TSN.ua: Ukraine's Cabinet of Ministers will not submit a draft law to introduce Value Added Tax (VAT) for individual entrepreneurs, known as FOPs, in February 2023. Prime Minister Yulia Svyrydenko confirmed this, stating the government has no intention of bringing this initiative to the Verkhovna Rada (Ukraine's parliament) during that period. This decision provides temporary relief for a significant segment of the Ukrainian economy.

The Ministry of Finance is currently working on amendments to the tax code for FOPs with an annual income exceeding 1 million hryvnias. Introducing VAT for these entrepreneurs is projected to increase budget revenues by 40 billion hryvnias. However, this move could significantly impact the prices of goods and services provided by FOPs.

Potential Consequences of VAT Implementation

Among the possible consequences of introducing VAT are:

• For entrepreneurs in the 1st group, prices are forecast to rise by 15-20%;
• For the 2nd group of FOPs, price increases of 10-15% are expected;
• FOPs in the 3rd group may transition to a new taxation model, which involves a 3% rate plus 20% VAT.

Consequently, Ukrainian entrepreneurs will not face new VAT requirements in February 2023, though discussions on changes to tax policy continue.

The decision to postpone the introduction of VAT for individual entrepreneurs in the near term may indicate the government's desire to avoid placing additional financial pressure on small and medium-sized businesses during a period of economic instability.

The ongoing discussions regarding tax legislation suggest the government is seeking optimal solutions to improve budget revenues, which could influence the country's future economic development.