Ukraine prepares simplified VAT for sole proprietors: reporting to be cut threefold

Ukraine plans to significantly simplify VAT administration for individual entrepreneurs. Sole proprietors – VAT payers will be able to file reports quarterly instead of monthly, and part of the data in declarations will be automatically filled by the tax authorities. The government has already approved the relevant draft law.

The Ministry of Finance of Ukraine reported this on September 3.

The Cabinet of Ministers approved the draft amendments to the Tax Code developed by the Ministry of Finance, aimed at reducing the number of reporting procedures, decreasing the administrative burden on businesses and expanding digital interaction with the State Tax Service.

However, the new rules have not yet entered into force. The draft law must still be considered and adopted by the Verkhovna Rada.

VAT reporting – four times a year instead of 12

One of the main changes concerns sole proprietors registered as VAT payers.

Currently, the base reporting period for VAT is a calendar month. The government proposes to switch to quarterly reporting for entrepreneurs.

Thus, the number of reporting periods for such sole proprietors will be reduced:

• now – 12 times a year;
• after the change – 4 times a year.

The Ministry of Finance expects that this will allow entrepreneurs to spend significantly less time on preparing tax reports.

The tax authority will partially fill in the declaration

Another innovation provides for automatic pre-filling of certain indicators of the VAT declaration and tax invoice.

The State Tax Service will generate such data based on information it already has and provide it to the entrepreneur through electronic services.

The sole proprietor will have to check the generated indicators, make changes if necessary, and then finally submit the declaration to the STS.

Currently, the entrepreneur fills in the VAT declaration independently.

The threshold for unscheduled audits will be increased tenfold

The government also proposes to significantly raise the threshold, exceeding which may lead to an unscheduled documentary audit in connection with declaring budget reimbursement or negative VAT value.

Currently, this threshold is 100 thousand UAH. The draft law proposes to increase it tenfold immediately – up to 1 million UAH.

Thus, declaring relatively small amounts of negative value or VAT reimbursement should not automatically create grounds for a corresponding unscheduled documentary audit.

Rules for tax invoices will be changed

Another change concerns the preparation of consolidated tax invoices.

VAT payers are proposed to be allowed to issue such an invoice no later than the last day of the month not only when supplying goods or services to buyers who are not VAT payers, but also when receiving prepayment from them.

Currently, the possibility to draw up consolidated tax invoices is provided for in the case of supplying goods or services.

Changes are related to €1.45 billion of EU aid

The Ministry of Finance noted that the draft law is not only part of the tax reform, but also one of Ukraine's international obligations to the European Union and the International Monetary Fund.

In particular, fulfilling the relevant condition is necessary for Ukraine to receive the third tranche of the EU macro-financial assistance in the amount of €1.45 billion.

After approval by the Cabinet of Ministers, the draft law is planned to be sent for consideration by the Verkhovna Rada.