IMF expects simplification of VAT administration in Ukraine before expanding tax to single taxpayers
The International Monetary Fund (IMF) considers high compliance costs for value-added tax (VAT) to be an obstacle for taxpayers in Ukraine and calls for measures to simplify its administration before introducing mandatory VAT registration for single-tax payers, namely sole proprietors (FOPs).
According to materials from the first review of the Extended Fund Facility (EFF) program, the IMF considers lengthy monthly declaration forms, compliance checks, and a large number of court cases related to blocked tax invoices to be the greatest burden for compliant taxpayers.
To solve these problems, the IMF proposes simplifying VAT declaration forms, improving the risk criteria of the automatic invoice registration system, developing an automated risk assessment system for audits, and raising the threshold for VAT refund checks from UAH 100,000 to UAH 1 million.
According to the Fund’s estimates, these measures will reduce costs for taxpayers, the State Tax Service (STS), and the judicial system without compromising tax discipline.
As reported, the Ministry of Finance of Ukraine plans to publish a draft law on its website by the end of July for a one-month public discussion regarding the simplification of VAT administration for small and medium-sized businesses (SMBs), according to which the volume of income will become the sole metric for mandatory VAT payer registration.
The document also provides for the development of measures to prevent illegal business fragmentation and hidden employment, the reform of the second and third groups of the simplified taxation system, and the implementation of European anti-tax avoidance rules (ATAD). The head of the Verkhovna Rada’s financial committee, Danylo Hetmantsev, supported the adoption of this law, proposing, in particular, not to apply tax invoice blocking rules to sole proprietors until they reach the single tax limit.
At the same time, the State Tax Service reported in June of this year that the share of blocked tax invoices decreased from 0.76% at the beginning of 2025 to 0.14% in June 2026. The STS is also drafting changes and consulting with businesses regarding the operation of the System for Monitoring Risk Evaluation Criteria (SMREC).
Businesses complain about the complexities of VAT administration to varying degrees. In the "Tax Index" survey by the European Business Association (EBA), 29% of respondents reported artificial blocking of tax invoices, and 15% of companies reported delayed checks for VAT refunds. According to a survey by the Institute for Economic Research and Policy Consulting, businesses are gradually ceasing to view tax invoice blocking as an obstacle: in May 2026, 3% of respondents named this a problem, whereas in May 2025, the figure was 4%, although during the year the indicator fluctuated upward, reaching 8% in September 2025.