The Ministry of Finance of Ukraine is developing a reform of the taxation system for small businesses [1].
These changes aim to increase budget revenues and modernize the tax framework for sole proprietors. If implemented, the shift will alter how thousands of small enterprises calculate their obligations and interact with the state tax authority.
The reform includes a plan to move a portion of sole proprietors from the second tax group to the third group [1]. Additionally, the ministry is working on the introduction of differentiated single tax rates to create a more nuanced system of payments [1].
A primary component of the proposal is the introduction of mandatory Value Added Tax (VAT) registration for businesses [1]. Under the proposed rules, any business with a turnover exceeding 85,000 euros must register as a VAT payer [1].
This specific requirement for VAT registration is planned to take effect starting in 2028 [1]. The ministry said the measures are intended to improve the overall tax system for small businesses [1].
Currently, the reform remains in the development phase. The Ministry of Finance has not yet finalized the full set of regulations that will govern the transition for sole proprietors moving between tax groups [1].
“The Ministry of Finance of Ukraine is developing a reform of the taxation system for small businesses.”
This reform signals a transition toward a more formal economy in Ukraine by tightening the requirements for sole proprietors. By lowering the threshold for mandatory VAT registration and shifting businesses into higher tax groups, the government seeks to reduce tax avoidance and align its domestic fiscal policies with broader European standards to stabilize national budget inflows.
