Why this is worth reading today
The mechanism proposed by the Ministry of Finance for mandatory registration of individual entrepreneurs (FOP) as VAT payers (with a 1 million UAH threshold) could affect about 660,000 individual entrepreneurs. The Business Ombudsman Council (RBO) is asking to reconsider the threshold to at least 4 million UAH and to carry out an audit of the System for Monitoring Risk Assessment Criteria (SMKOR) — not as a political gesture, but as a practical step to preserve economic stability.
What the Business Ombudsman Council (RBO) proposes
The Business Ombudsman Council sent recommendations to the Cabinet of Ministers: raise the threshold for mandatory VAT registration to 4 million UAH, taking into account inflation since 2015, and do not implement changes without a prior audit of SMKOR and modelling of the impact on new registrants.
"The initiative in its current form could become a critical burden for small and micro businesses"
— Business Ombudsman Council (official statement)
Why 4 million UAH is a reasonable figure
The RBO based its approach on purchasing power: the 1 million UAH threshold was set in 2015. At the exchange rate on January 1, 2015, 1 million UAH equaled approximately $63,400, while on January 1, 2026 it was about $23,600. By that logic, to preserve the equivalent boundary, the threshold should increase nearly threefold, i.e., to roughly 4 million UAH.
Risks for entrepreneurs and for the budget
The RBO warns that automatic registration combined with the operation of SMKOR could turn the status "new taxpayer — risky" into a catalyst for invoice blocking, loss of working capital and business stoppages. Official estimates name average annual VAT compliance costs of 2,751 UAH, but studies and real cases show that the cost can reach ≈120,000 UAH per year due to accounting services, time and dispute resolution.
"Because of the obligation to register invoices, new taxpayers will fall under the VAT monitoring system, which may become a significant obstacle to everyday operations"
— Business Ombudsman Council (comment on the recommendations)
Context: timelines and international commitments
The Ministry of Finance's draft law provides that from January 1, 2027, single-tax payers whose sales volume exceeded 1 million UAH in the last 12 months will be required to register as VAT payers. This provision is mentioned as a condition of cooperation with the IMF and is reflected in the National Revenue Strategy. Thus, the decision is not only an internal tax reform but also part of negotiations with strategic partners.
Analysis: how to find a balance
There is an obvious dilemma: the state needs stable revenues, while during and after the war it is more important to preserve the entrepreneurial front — micro and small businesses that provide jobs and economic flexibility. The RBO proposes a pragmatic approach: raise the threshold to a realistic amount, audit SMKOR and introduce changes in stages to avoid shock effects.
What this means for the reader
For FOP owners this is about liquidity, additional accounting costs and the risk of invoice blocks. For citizens — about whether the cost of services and goods might rise due to added expenses for entrepreneurs. For the state — about the trade-off between quick revenues and long-term economic resilience.
Conclusion
The decision rests with the Cabinet and lawmakers, but the RBO's arguments carry weight: this is not just sympathy for business, but an analysis of purchasing power, potential costs and systemic risks. The question is not whether to collect taxes, but how to do so without undermining the economic base that is keeping the country afloat today.
Summary: an audit of SMKOR, raising the threshold and phased implementation — a compromise that preserves both budget revenues and the ability of small businesses to operate during the country's reconstruction.
