Taxes for individual entrepreneurs to increase in Ukraine

Ukraine plans to reform the simplified taxation system for individual entrepreneurs and increase taxes.

RBC-Ukraine writes about this with reference to the Report of the Ministry of Finance on the implementation of the National Revenue Strategy in 2024.

It states that the reform of the simplified taxation system is planned a year after the implementation of the measures specified in subsection 4.2.3(b) of the Strategy.

In 2024, this point of the strategy was not implemented.

According to the National Revenue Strategy, the reform will be aimed at implementing the following changes, compared to the current simplified taxation system model:

1. During the transition period, which will last three years, the single tax rates for legal entities of the third group will gradually increase to the amount of the regular income tax rate (currently 18%). After the end of the transition period, a ban will be imposed on legal entities to remain on the simplified taxation system.
2. The second and third groups of simplified taxation system for individual entrepreneurs will be combined into one, and income tax rates will be differentiated. This scale will provide for a minimum rate of 3% for trading activities and will contain a gradation of rates up to 17% for a number of services.
3. The list of activities permitted for participation in the first group of simplified taxation system will be revised in order to reduce them at the expense of high-margin types of business. The approach to taxation will be revised: the fixed tax rate will be abolished and only the tax on actually received income will be applied.
4. The use of settlement transaction registrars (classic payment transactions recorder or software payment transactions recorder) will be mandatory for simplified taxation system payers of the combined second group.
5. The threshold for registration as a VAT payer will be effectively applied to all simplified taxation system payers.
6. For peasant farms (individuals), which will remain in the regime of the fourth group of the simplified taxation system, the tax base will be expanded.
7. For producers of agricultural products (legal entities), the single tax rates will be revised upwards within three years to an amount equivalent to the general value of the income tax rate.
8. Exceptions regarding the possibility of conducting economic activities without the obligation to keep records and document the origin of goods sold will be canceled.

According to the Ministry of Finance, as of January 1, 2025, the total number of individual entrepreneurs who apply the simplified taxation system is 1,625,700 people, which is 52,500 people more than as of January 1, 2024.

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