Abolition of VAT exemption on parcels worth up to EUR 150 will eliminate smuggling fragmentation schemes, bring UAH 10 bln to budget – Finance Ministry
The introduction of taxation on international postal items (bills No. 15112-D and No. 12360) aims to eliminate illegal schemes in which commercial consignments of goods are artificially split into smaller parcels to evade taxes, according to a publication posted on the website of the Ministry of Finance of Ukraine on Monday.
According to the ministry, less than 1% of the 75 million parcels shipped annually are currently subject to tax. The bill proposes eliminating the value-added tax (VAT) exemption for parcels valued up to EUR 150, which, according to the ministry's calculations, will generate approximately UAH 10 billion in additional revenue for the state budget annually.
It is noted that the new rules also distinguish between commercial transactions and private shipments: citizen-to-citizen (C2C) parcels worth up to EUR 45 will be tax-exempt, provided they are free of charge and intended for personal use.
Regarding price increases, the Ministry of Finance emphasized that not a single manufacturer, retail chain, or business association has stated the need to raise prices due to the reform.
"The EU's experience, which abolished a similar benefit in 2021, also did not show a massive price increase," the ministry added.
The ministry also explained that the new tax rules for parcels worth up to EUR 150, according to the draft law, will come into effect in 2027, and the government will make a decision on the system's launch only after confirmation of the full readiness of the customs authorities' IT component and the corresponding marketplace software. During the first year of the system's operation, administrative penalties for unintentional VAT payment errors will not apply.
The revised bill (No. 15112-d), prepared by members of the Verkhovna Rada Committee on Finance, Taxation, and Customs Policy, aims to harmonize Ukrainian legislation with European Union (EU) Directives. The document defines the terms "electronic interface," "remote sale of goods," and the rules for calculating taxes for such transactions. It also imposes a 20% VAT obligation on foreign marketplaces (electronic interfaces), where the tax will be automatically included in the price of the product at the time of purchase.
The document also provides for a tax exemption for goods in unaccompanied baggage worth up to EUR 150, expanded benefits for the Ukrainian Defense Forces through a VAT exemption for all types of unmanned aerial vehicles (UAVs), including armed ones, and their parts, and a tax exemption for energy equipment.
As reported, the adoption of these changes is a structural milestone in the program of cooperation with the International Monetary Fund (IMF), which Ukraine was supposed to complete by March of this year.
Leading business associations, including the American Chamber of Commerce in Ukraine (AmCham), the European Business Association (EBA), and the Ukrainian Business Council (UBC), called on parliament to immediately pass the bill. According to them, the current tax break has cost the budget over UAH 43 billion since the start of the full-scale war.
At the same time, the initiative has drawn criticism from postal operators. Volodymyr Popereshniuk, co-owner of Nova Poshta, and Igor Smelyansky, CEO of Ukrposhta, believe it will reduce Ukrainians' purchasing power and strengthen the position of domestic retailers. Smelyansky noted that while working with the relevant committee has made the mechanism less painful, it doesn't create a "level playing field."
