Ukraine: Draft legislation to simplify VAT administration in line with EU, IMF requirements; other indirect tax developments
Summary of recent indirect tax developments in Ukraine
The Ukrainian legislature introduced Bill No. 16037-1, proposing to simplify VAT administration in line with EU and IMF requirements, including (1) a choice of monthly or quarterly VAT reporting for VAT-registered sole proprietors, (2) pre-filled VAT returns and invoices, (3) increasing the threshold for unscheduled documentary audits from UAH 100,000 to UAH 1 million, (4) expanding e-cabinet pre-filling, (5) permitting certain consolidated tax invoices, and (6) refining wartime incentives for voluntary payment of assessed tax liabilities.
The Ukrainian Parliament Committee on Finance, Tax and Customs Policy on October 6, 2026, recommended that Parliament adopt the bill.
Other recent indirect tax developments include:
- Clarification on applicability of zero VAT rate to supply of certain defense goods: The Directorate of the State Tax Service on September 28, 2026, published guidance clarifying that the 0% VAT rate for specified equipment, spare parts, and fuel and lubricants supplied to eligible defense, security, and other institutions under Resolution No. 178 applies only when the relevant goods are used for Ukraine’s national security and defense, public safety, or state interests, while equipment purchased for vehicles not directly used for those purposes is subject to VAT under the general rules.
- Parliament approves new VAT rules for international parcels: The Ukrainian Parliament on September 16, 2026, approved at first reading Bill No. 16051-1, proposing to abolish the VAT exemption for international postal and express shipments valued at up to €150. The bill would introduce special VAT rules for low-value distance sales, while retaining exemptions for certain noncommercial consignments up to €45 and specified baggage, security, and defense goods.
- Draft 2027 budget proposes increase in VAT standard rate: The Ministry of Finance of Ukraine on September 15, 2026, approved the draft 2027 budget, which includes a proposed increase in the standard VAT rate from 20% to 21% as a source of funding for war-risk insurance and other financial support. The proposed VAT increase would require separate approval by the Verkhovna Rada and could become effective January 1, 2027.
- Draft law proposes reduction in VAT rates for food, medicines, and essential goods: The Ukrainian Parliament on September 14, 2026, received Draft Law No. 16069, proposing a 5% VAT rate for qualifying medicines, medical devices, specified health and children’s products, and a defined range of basic food products. The draft also proposes a temporary 7% VAT rate for specified goods needed during electricity outages.
For more information, contact a KPMG tax professional in Ukraine:
Oksana Olekhova | oolekhova@kpmg.ua