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The Draft Law on VAT for Individual Entrepreneurs Discussed at the SRS: Position of the Business Community

Tetyana Dumenkova, Deputy Head of the Fuel and Energy Business Association (FEBA), participated in a roundtable organized by the State Regulatory Service of Ukraine, involving representatives from the Ministry of Finance and the business community. The event focused on discussing a draft law proposed by the Ministry of Finance regarding the introduction of VAT for single-tax payers.

While the Ministry of Finance justifies the initiative by citing the need for European integration and the leveling of competitive conditions, representatives of leading business associations and economic experts provided professional arguments against the adoption of the document in its current wording.

Key Points from the Business Community:

  • Inconsistency with European Norms: Threshold values for mandatory VAT registration in EU countries are significantly higher than the proposed 1 million UAH. Participants emphasized that European directives provide for the simplification of processes for small businesses rather than additional burdens.
  • Critical Discrepancy in Cost Calculations: According to the Ministry of Finance’s Regulatory Impact Analysis (RIA), business expenses would amount to approximately 2 billion UAH per year. In contrast, analysts from CASE Ukraine and the Ukrainian Business Council (URB) point to a range of 61 to 116 billion UAH in unproductive compliance costs annually. This is driven by the need to hire accountants and manage complex administration.
  • Time Burden for Accounting: Instead of the 56 hours per year declared by the Ministry of Finance, the actual time spent on VAT administration is estimated at over 600 person-hours (approximately 140 working days), which is critical given the current labor shortage.

Conclusions of the Business Community:

  1. Negative Economic Effect: The expected budget revenues (approx. 40 billion UAH) are lower than the costs businesses will incur to service the tax. This will lead to price increases and inflationary pressure.
  2. Shadow Economy Risks: Complex administration and the risks of blocking tax invoices may force a significant number of Individual Entrepreneurs (FOPs) to cease official operations or move into the “shadow.”
  3. The Need for Alternatives: Business calls for a focus on simplifying VAT accounting for the general taxation system and strengthening the fight against shadow schemes in excisable industries, rather than expanding the tax burden on small businesses.

The Fuel and Energy Business Association supports the consolidated position of the expert community and insists on a thorough revision of the draft law, taking into account real economic indicators and the operating conditions for businesses during martial law.

Press Service of the Fuel and Energy Business Association (FEBA)

Andriy Kopylov
Head of the Standards Committee 

Personnel training specialist with over 20 years of experience in fuel companies. Has conducted more than a thousand training sessions for filling station network managers. Involved in the development and implementation of fuel standards, customer service standards, and operational procedures for fuel industry professionals.