Марія Бровінська Money 17 March 2025, 11:09

UPD. The Ministry of Finance does not yet plan to raise taxes for individual entrepreneurs and reform the simplified taxation system. What awaits business and is there a chance to maintain current rates

The Ministry of Finance plans to increase taxes for entrepreneurs. In particular, it is planned to significantly increase the fiscal burden on individual entrepreneurs over the next three years. However, deputies criticize this initiative.

(News supplemented with the position of the Ministry of Finance)

What happened

The authorities plan to reform the simplified taxation system for individual entrepreneurs and increase taxes. This is stated in the Ministry of Finance’s Report on the Status of Implementation of the National Revenue Strategy in 2024.

As noted in the report, the reform of the simplified taxation system is planned one year after the implementation of the measures specified in subsection 4.2.3(b) of the Strategy.

This subsection is formulated as follows: «Implementation of measures aimed at the security of data use and access to information on the volume and turnover of taxpayers' funds in their bank accounts. Development of a concept and security policy for the use of (personalized) depersonalized information about taxpayers by tax authorities.»

A reform of the simplified taxation system is planned, which will be aimed at implementing the following changes, compared to the current model of the simplified taxation system:

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, legal entities will be prohibited from remaining on the simplified taxation system.
The second and third groups of the 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.
The list of activities permitted to participate in the first group of the simplified taxation system will be revised 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.
The use of settlement transaction registrars (classic PRO or software PRO) will be mandatory for payers of the simplified taxation system of the second combined group.
The VAT registration threshold will effectively apply to all taxpayers of the simplified taxation system.
For peasant farms (individuals) that will remain in the fourth group of the simplified taxation system, the tax base will be expanded.
For agricultural producers (legal entities), the single tax rates will be revised upwards over three years to an amount equivalent to the general value of the income tax rate.
Exceptions regarding the possibility of conducting business activities without the obligation to keep records and document the origin of goods sold will be abolished.

How many sole proprietorships are there in Ukraine?

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

In terms of groups, individuals — entrepreneurs who apply the simplified taxation system were selected:

the first group — 194,900 people, which is 7,4% less than in 2023, whose share in the total number was 12%;
the second group — 630,600 people, which is 4,8% more than in 2023, whose share in the total number was 38,8%;
the third group — 800,200 people, which is 4,9% more than in 2023, whose share in the total number was 49,2%;
the fourth group — 700 people.

In total, as of January 1, 2025, revenues amounted to over UAH 55.1 billion, which is UAH 17.1 billion more compared to the previous year.

Deputies — against

Meanwhile, deputies are criticizing this initiative. Yaroslav Zheleznyak, First Deputy Chairman of the Verkhovna Rada of Ukraine Committee on Finance, Tax and Customs Policy, People’s Deputy from the Holos party, reacted critically to the Ministry of Finance’s initiative to increase taxes for individual entrepreneurs:

«I don’t know who in the Government decided that they want to raise taxes on individual entrepreneurs to 18%… I don’t think it’s serious,» he noted.

The People’s Deputy added that the Tax Committee will not miss these changes: «I will say that there is ZERO chance of this! Our Tax Committee will never miss this.» Zheleznyak suggested that his fellow People’s Deputy members of the Servant of the People party would also not support such an initiative.

The People’s Deputy added that our government is «wasting» billions of taxpayers' hryvnias on «terry populism in the style of «1000 Zelenskyy/cashback or corrupt idiocy in purchasing Russian nuclear junk.» He also called for signing the bill on increasing the excise tax on tobacco products, adopted by the Verkhovna Rada in early December.

As a reminder, the Ministry of Finance of Ukraine has published a report on the implementation of the National Revenue Strategy in 2024. The document states that the reform of the simplified taxation system (STS) will take place after the implementation of measures to control the financial transactions of taxpayers. Currently, this stage of the strategy has not yet been implemented. The STS reform will change the rules of the game for small and medium-sized businesses. Entrepreneurs should prepare for a gradual increase in the tax burden and increased control by the state.

UPD. What the Ministry of Finance says

The Ministry of Finance stated that they do not plan to increase taxes for individual entrepreneurs. «Anonymous „Telegram channels“ have spread information and clickbait headlines that the Ministry of Finance is already planning to increase taxes for individual entrepreneurs. Such information is untrue and manipulative in nature. Legislative changes to the elements of the simplified taxation system will begin to be worked out only after the prerequisites for such a reform are met, not earlier than the year following the one in which measures regarding the security of data use and access to information on the volume and turnover of taxpayers’ funds in their bank accounts will be considered fulfilled. This process will take place publicly and will require discussions with the public, business and all branches of government, as well as with the involvement of international partners. Only after public discussions will the legislative changes be considered and adopted by the Verkhovna Rada of Ukraine,» the ministry said in a statement.

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