Main points
- Discussions on introducing VAT for sole proprietors have been postponed, possibly until 2027, in order to find alternative solutions.
- The government plans to step up the fight against the shadow economy through changes in the tax service and restrictions on the payment of the minimum wage in certain areas.
VAT for sole proprietors has not yet been introduced, but there will be restrictions on the minimum wage / uain.press
The issue of VAT for individual entrepreneurs is the real tax intrigue of the year, which the IMF has agreed to postpone and consider alternative ways. But it seems that the decision will not be as quick as expected – there is a high probability that the innovations will be postponed until 2027.
Will there be VAT for individual entrepreneurs and how will shadow business schemes be controlled?
The Ukrainian authorities, together with representatives of the International Monetary Fund, have almost reached the final point in discussing the issue of introducing VAT for individual entrepreneurs, Forbes writes.
Final approval of this issue will take place during the IMF mission to Kyiv in May,
– an anonymous source told the publication.
In parallel, the government is negotiating with the IMF to strengthen the fight against the shadow economy. This involves a whole set of measures aimed at closing popular tax evasion schemes:
- the practice of “splitting a business” into several sole proprietorships in order to pay less taxes;
- illegal tobacco trade;
- payment of salaries “in envelopes”.
The preliminary plan includes not only changes to the laws, but also a serious “reboot” of the work of key regulatory bodies. We are talking about the tax service, customs and the Bureau of Economic Security. It is expected that their efficiency and coordination will be strengthened in order to better detect and stop violations.
Separately, the idea of setting limits on the payment of the minimum wage in those areas where real incomes are much higher is being discussed. In this way, the authorities want to close loopholes when the official minimum is paid and the rest is paid to evade taxes.
They also plan to take a tougher approach to large businesses that formally operate through a network of individual entrepreneurs but do not actually switch to the general taxation system. Sanctions may be imposed on such companies.
Will taxation of individual entrepreneurs affect the prices of goods and services?
Economist Oleg Getman, in a conversation with Channel 24, says that the most realistic option is that the tax bill will not come into effect in 2027, because there is no will in parliament for this. There is an assumption that it will either come into effect in 2028, or when Ukraine joins the EU.
Oleg Getman
Coordinator of expert groups of the Economic Expert Platform
If we assume that the new changes will come into effect in 2028 or some other year, then most individual entrepreneurs who fall under the threshold of over 4 million hryvnias will not switch to VAT. Only about 20-30% of all entrepreneurs can do this.
The thing is that an individual entrepreneur with an annual income of 6 million hryvnias will not spend a lot of money on administration, accounting, etc. within the framework of the new changes. It is easier for him in this situation to open another individual entrepreneur. In particular, in the name of his parents, brother or sister, or one of the pensioners.
Thus, it is not worth expecting that the prices of goods will increase sharply after the change in taxation. This will affect more those who will still pay VAT,
– predicts Mr. Oleg.
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How and when should individual entrepreneurs pay VAT?
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On March 19, the Ministry of Finance published a draft law on increasing taxes in Ukraine. It concerned VAT for individual entrepreneurs from January 1, 2027.
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VAT was to be paid by businesses with an annual income of over 4 million hryvnias. These individual entrepreneurs and legal entities, currently paying a single tax (simplified tax), were required to switch to VAT.