Changes to VAT administration for businesses on the simplified tax system could significantly impact entrepreneurs. These and related issues were discussed by experts from the SUP Analytical Center during a meeting with Svitlana Vorobey, Deputy Minister of Finance of Ukraine.
During the meeting, the Ministry of Finance presented a concept for VAT administration for Individual Entrepreneurs (FOPs) and legal entities on the simplified system. This concept is based on the provisions of the draft law regarding the registration of single tax payers as VAT payers, published on December 18, 2025, on the Ministry’s website. The Government intends to further refine this document based on ongoing discussions.
Key provisions of the concept (subject to the draft law’s approval):
- Automatic status assignment: Based on the analysis of 2025–2026 data, the system will automatically assign VAT payer status and a registration number in Q1 2027 to FOPs whose annual turnover exceeded UAH 1 million.
- Mandatory transition: All simplified taxation payers will effectively become VAT payers starting from Q2 2027.
- Transition period incentives: A symbolic fine of UAH 1 per violation will be applied to simplified tax payers throughout 2027.
- Reporting changes: Quarterly VAT reporting will be introduced for entities on the simplified system who are registered as VAT payers.
SUP highlighted several key risks, including:
- Incomplete data sources: Automatic VAT registration of FOPs based on RRO/PRRO (cash register) data may fail to account for entrepreneurs who are not legally required to use them.
- Turnover volatility: The risk of mandatory VAT registration for businesses that exceeded the income limit in 2025–2026 but will not maintain such turnover in the future.
- Force majeure conditions: Automatic registration even in cases where production facilities were destroyed due to Russian military aggression in 2025–2026, provided the UAH 1 million threshold was previously met.
- European inconsistency: The proposed limit’s inconsistency with the recommendations of EU Council Directive 2006/112/EC regarding the VAT system.
SUP looks forward to continuing a constructive dialogue and jointly seeking balanced solutions that will allow for the replenishment of state and local budgets without creating excessive risks for small and medium-sized businesses.