The Union of Ukrainian Entrepreneurs (SUP) opposes the introduction of mandatory VAT registration for simplified tax payers with a turnover starting from UAH 1 million.
The proposed changes are premature, economically unjustified, and create excessive risks for micro and small businesses during the war. Their implementation will not lead to the expected growth in budget revenues; instead, it will worsen business conditions, stimulate the downsizing of operations, and further drive the economy into the shadows.
According to the Ministry of Finance of Ukraine, approximately 660,000 business entities, primarily micro and small entrepreneurs, will fall under the new rules. For a significant portion of them, VAT administration will mean a disproportionate increase in costs for accounting, compliance, and interaction with fiscal authorities. Real losses for micro-businesses from the introduction of VAT exceed the expected fiscal effect by at least 1.5 times, making the initiative economically impractical.
Furthermore, the current VAT administration system remains complex and risky, as noted by the National Agency on Corruption Prevention (NAPC) in its 2023 report. The results of the audit of the system for suspending tax invoice registration, conducted in accordance with Presidential Decree No. 21/2024, remain non-public, undermining business trust in any expansion of VAT obligations.
The primary step for budget replenishment should be focusing the law enforcement system on combating the use of the simplified taxation system by large businesses (business splitting), the import of goods without customs clearance, the abuse of replacing employees with private entrepreneurs (FOPs), the elimination of tax evasion schemes, and shadow markets for excised goods. According to estimates by the “Case Ukraine” analytical center and the Economic Expert Platform, the annual volumes of the shadow economy are:
- Unaccounted imports and smuggling: UAH 380–540 billion;
- “Enveloped” salaries: UAH 230–460 billion;
- Conversion center turnover: approximately UAH 310 billion;
- Tax fraud (“skrutky”): approximately UAH 100 billion;
- Counterfeit production and illegal trade (including the “grey” market for excised goods): approximately UAH 120 billion;
- Funds withdrawn to offshores and low-tax jurisdictions: UAH 50–60 billion.
Therefore, sources to cover the budget deficit should be sought not within micro-businesses, but in the large corporate sector with complex tax evasion schemes.
Under the conditions of full-scale war, regular shelling, prolonged power outages, and unstable logistics, additional fiscal and administrative pressure on micro-businesses is extremely ill-advised. This is especially true given that significant budget losses are formed not by small businesses, but through the ineffective work of fiscal and law enforcement agencies, smuggling, and shadow markets.
In this regard, the Union of Ukrainian Entrepreneurs proposes:
Focus Government efforts on increasing the efficiency of the Ministry of Finance, the Tax and Customs Services, the Bureau of Economic Security (BEB), and the law enforcement system in eliminating tax evasion schemes, business splitting, smuggling, and shadow markets for excised goods. The potential economic effect of these measures many times exceeds the revenue from expanding VAT to the simplified system.
Immediately eliminate corruption risks in VAT administration identified by the NAPC and publish the results of the audit of the tax invoice registration suspension system.
Conduct a proper and transparent regulatory impact analysis with realistic calculations of administrative costs for business, especially for micro and small enterprises.
After the end of martial law, consider introducing a unified mandatory VAT registration threshold for all business entities at a level of no less than EUR 85,000 in annual turnover (corresponding to European practice), calculated at the official NBU exchange rate.
Reference:
On December 18, 2025, the Ministry of Finance of Ukraine published a draft law “On Amendments to the Tax Code of Ukraine regarding the registration of simplified tax payers as value-added tax payers.” The document stipulates mandatory VAT registration for entrepreneurs on the simplified system if their annual income exceeds UAH 1 million and is planned for implementation from January 1, 2027.
The Union of Ukrainian Entrepreneurs (SUP) is the largest independent business community in Ukraine, uniting 1,300 small, medium, and large companies from all regions of the country. SUP systematically participates in the formation of economic and tax policy and advocates for reforms aimed at developing entrepreneurship rather than creating additional barriers for legal business.