Artem Kuzmenko, Partner
The new legislation will affect more than just prices on Temu and AliExpress. It will also change the rules for foreign platforms operating in Ukraine. For some sellers, complying with these requirements may prove more expensive than paying VAT itself.
On 15 October, the Verkhovna Rada adopted Bills No. 16051-1 and No. 15460 in their final reading. The VAT exemption for commercial parcels valued at up to €150 has been abolished: VAT at 20% will be charged from the first euro and included in the price paid at checkout on the marketplace. Non-commercial parcels exchanged between private individuals worth up to €45, unaccompanied baggage worth up to €150, and certain defence-related goods will remain exempt. As before, parcels valued at up to €150 will not be subject to customs duty.
Consumers will face higher prices, while Ukrainian retailers will finally compete on a more level playing field with foreign sellers. However, the most significant changes will affect the platforms themselves.
The Platform Collects the Tax
The model follows the European Union’s Import One-Stop Shop (IOSS) system: VAT is calculated and collected by the marketplace at the point of sale, rather than being paid by the customer upon customs clearance. It is easier for the state to deal with platforms than with millions of individual consignments, and I support this approach.
For the platforms, however, this represents a separate compliance project. A non-resident operator must appoint an intermediary in Ukraine. Both must register with the customs authorities and obtain a special VAT identification code for distance sales. They will then be subject to monthly reporting obligations, detailed sales record-keeping requirements, with records available to customs upon request, and a guarantee securing VAT payments equivalent to €100,000. Crucially, it is the Ukrainian intermediary that must provide this guarantee.
In effect, the intermediary assumes a financial risk relating to another party’s tax obligations, and not every business will be willing to take on that responsibility. A foreign company will need to find a local partner and negotiate the cost of assuming that risk, the arrangements for monitoring tax calculations and payments, and liability in the event of tax disputes or assessments. This applies even if the company has never intended to establish a legal entity or office in Ukraine.
Who Stands to Benefit?
A Ukrainian importer pays VAT, maintains warehouses, employs staff and provides warranty services. By contrast, a seller shipping parcels directly to consumers with a value of up to €150 has, for years, paid no VAT on those consignments. This disparity needed to be addressed, and the argument for establishing a level playing field is entirely justified.
However, it would be naive to expect Ukrainian retailers to start outperforming AliExpress and Temu as a result. The competitive advantages of these platforms lie in their product ranges, economies of scale and logistics. The tax exemption was only one part of the equation.
What interests me more is another potential consequence. For a global platform with in-house lawyers, tax specialists and experience of operating across dozens of jurisdictions, the Ukrainian requirements are simply another item on the implementation agenda. For a niche online retailer processing only a few thousand Ukrainian orders a year, however, the financial guarantee, intermediary arrangements and customs integration could make the Ukrainian market commercially unviable.
Such sellers may either withdraw from the market or move to major marketplaces that can handle these compliance functions on their behalf, thereby becoming even more dependent on those platforms.
A reform intended to create fairer competition could ultimately strengthen the largest market participants. This is not an argument against taxation, but it is a consequence worth considering.
Where the System Could Fail
Calculating 20% VAT is the simplest part of the process. The greater challenge is ensuring that the platform, postal operator and customs authorities all have matching records of the same transaction.
The entire system relies on a unique purchase reference number. Before the goods enter Ukraine, the platform submits the reference number, value, currency and payment date to customs. The postal or express delivery operator receives the same reference. Customs then automatically matches the information, allowing the parcel to be processed through an electronic register without a separate customs declaration.
Yet e-commerce is full of exceptions.
An order contains three items, but one seller never dispatches their product. A customer cancels part of an order. A parcel is lost or returned to the sender. In each case, the platform’s records may no longer correspond to the goods that physically arrive.
It remains unclear who will be responsible for correcting these discrepancies, how long the process will take and where the parcel will be held in the meantime. Another important question is how quickly customers will receive VAT refunds for returned goods.
Consumers are unlikely to care how sophisticated the tax administration system is if they cannot collect their orders. For platforms, such failures translate into additional customer support costs, delays and lost business.
The best outcome is one in which consumers do not notice the new system at all.
UAH 10 Billion Remains a Forecast
The Ministry of Finance expects the reform to generate approximately UAH 10 billion annually, with the proceeds allocated to the Armed Forces of Ukraine through a dedicated fund. The legislative package also forms part of Ukraine’s commitments to the International Monetary Fund and is a condition for receiving EU macro-financial assistance. In wartime, I would not dispute the importance of these objectives.
However, the actual revenue will depend on how consumers and sellers respond. Some people will place fewer orders, others will switch to Ukrainian retailers, and some foreign businesses will restructure their operating models. We will only be able to assess the actual figures after the system has been operating for at least a year.
At the same time, Ukraine is encouraging foreign businesses to invest and enter its market.
Such businesses are not necessarily deterred by taxes. What matters to them is being able to calculate the cost of compliance and assess the risks they are assuming in advance, with confidence that the rules will not be changed halfway through the process.
When deciding whether to establish a presence in a market, these considerations often carry more weight than the tax rate itself.
Will the System Be Ready by July 2027?
The legislation still requires the President’s signature, and its provisions will not take effect before 1 July 2027, leaving approximately eight and a half months to prepare.
In addition to the commencement date, a separate decision by the Cabinet of Ministers will be required to confirm the readiness of the customs IT systems, marketplaces and VAT collection mechanism.
The legislation also provides for an initial one-year period during which no penalties will be imposed for incomplete or late VAT payments, provided that the tax is ultimately paid in full.
Both safeguards are sensible.
However, the absence of penalties will not compensate businesses for the costs of delays and dissatisfied customers. Equally, a formal assessment of system readiness can easily become a box-ticking exercise when the authorities are under pressure to fulfil commitments to international partners.
Global platforms incorporate regulatory changes across dozens of countries into shared software development schedules. For them, eight months is not a particularly long lead time.
Final secondary legislation and technical specifications must therefore be made available as early as possible.
A testing environment is equally essential. It should allow businesses to simulate an ordinary purchase, a partial cancellation, a return, a data error and a change in the value of an order.
If the state transfers responsibility for administering the tax to private businesses, it must provide the infrastructure required to make the system work.
Only Half the Job Is Done
I support the removal of the VAT exemption for low-value commercial parcels. Fairer competition for Ukrainian businesses, additional budget revenue and closer alignment with EU rules are sufficient reasons to proceed.
However, passing the legislation is only half the job.
The other half involves implementing secondary legislation, developing technical specifications and conducting thorough testing.
These steps will determine whether Ukraine’s version of IOSS becomes an effective operational tool or yet another barrier that prompts some foreign sellers to stop shipping goods to Ukraine altogether.
This opinion column reflects solely the author’s views and does not purport to provide an objective or comprehensive examination of the subject. The editorial positions of Ekonomichna Pravda and Ukrainska Pravda may differ from those expressed by the author. The editorial team accepts no responsibility for the accuracy or interpretation of the information presented and acts solely as the publisher of this material.
