Tax Reform 2027: IMF Demands VAT for Sole Proprietors and New Single Tax Rates

In August 2026, a debate erupted within the Ukrainian economic bloc regarding a massive tax reform being prepared by the Ministry of Finance in conjunction with the State Tax Service. According to documents available to the editorial staff, the government plans to radically change the operating conditions for individual entrepreneurs (sole proprietors). These measures are a direct response to the demands of the International Monetary Fund (IMF) and the European Union under the Extended Fund Facility (EFF) program worth 90 billion euros.

Differentiation of Single Tax Rates

One of the key points of the upcoming changes to the Tax Code will be the introduction of differentiated single tax rates. In particular, for Group 3 taxpayers providing services, rates may be revised. This refers to a possible increase in tax rates to 10% for certain categories of entrepreneurs. This decision aims to increase the fiscal burden on the most profitable service sectors, bringing the Ukrainian model closer to European standards.

Transfer of Business Activities and the Polish Model

In addition to changing rates, legislators are considering the possibility of transferring certain types of activities from Group 2 to Group 3 of single tax payers. This will affect sectors that previously enjoyed preferential conditions but will now be considered more commercially mature. Experts note that such steps resemble the implementation of the so-called "Polish model" of taxation, which implies stricter business segmentation and income transparency.

Introduction of VAT for Sole Proprietors: New Deadlines and Conditions

The most painful change for small businesses will be the mandatory registration as Value Added Tax (VAT) payers. According to the Ministry of Finance's plan, this norm will gradually apply to sole proprietors whose annual turnover exceeds 4 million hryvnias (approximately 85,000 euros). It is important to note that the bill is planned to be adopted in early 2027, and it will come into force on January 1, 2028. This decision is dictated by the need to harmonize Ukrainian legislation with EU norms.

Simplification of Administration for VAT Payers

Understanding the risks of bureaucratic burden, the Ministry of Finance proposes a number of compensatory measures for those sole proprietors who will be forced to switch to VAT. In particular, it is proposed to allow the submission of quarterly reports instead of monthly ones, which will significantly reduce administrative costs. There are also plans to implement a system of pre-filling declarations, which will minimize errors and simplify the process of interaction with the tax service.

Contradictory Data

There are discrepancies regarding the exact timing and scope of changes. Initially, it was assumed that the introduction of VAT for taxpayers of the simplified system would come into force in January 2027. However, as reported by RBC-Ukraine, the IMF has agreed to postpone the deadlines by one year. At the same time, according to current documents, the law must be adopted in early 2027, and come into force in 2028. Ambiguity remains regarding the specific types of activities that will be transferred from the second to the third group: the government has not yet disclosed this list, which causes concern among entrepreneurs.