Ukraine and IMF explore bank tax alternatives to avoid mandatory VAT for sole proprietors in 2027

Ukraine and the IMF are negotiating alternatives to the 2027 VAT mandate for sole proprietors. Learn how bank profit taxes could fill the budget gap instead.

By: AXL Media

Published: Apr 20, 2026, 8:24 AM EDT

Source: Information for this report was sourced from Interfax-Ukraine

Diplomatic Pivot During Washington Spring Meetings

The Ukrainian government has successfully engaged the International Monetary Fund in discussions to scrap a proposed mandate for value-added tax on sole proprietors. During the Spring Meetings in Washington, which concluded in mid-April 2026, Prime Minister Yulia Svyrydenko reported that the IMF now acknowledges the extreme social and political sensitivity surrounding the issue. This shift follows direct intervention from President Volodymyr Zelenskyy, who argued that imposing VAT on micro-businesses during a wartime economy is not a constructive path toward fiscal sustainability.

Banking Sector Levies as a Revenue Alternative

To satisfy the revenue requirements of the 2027 state budget, Kyiv is weighing a strategic extension of the current 25 percent corporate income tax on banks. Serhiy Naumov, the president of the National Association of Banks of Ukraine, indicated that maintaining this elevated rate beyond its scheduled expiration could serve as a viable substitute for the VAT mandate. By shifting the fiscal burden from small-scale entrepreneurs to the highly profitable banking sector, the government hopes to generate the necessary liquidity while preserving the simplified taxation system for individuals.

Legislative Resistance in the Verkhovna Rada

The government's initial "large tax bill" faced significant hurdles within the Verkhovna Rada, where lawmakers expressed hesitation over the impact on small businesses. Andriy Motovylovets, deputy head of the Servant of the People faction, clarified that the parliament is currently unwilling to support mandatory VAT registration for entrepreneurs earning more than 4 million UAH annually. Lawmakers have demanded exhaustive financial modeling and additional explanations before moving forward with any structural changes that could jeopardize the resilience of the nation's self-employed workforce.