Ukraine weighs VAT on low-value foreign parcels to support local retailers

Author: Oleksandr Sharipov

The measure is part of Ukraine’s commitments under its cooperation with the International Monetary Fund, the Finance Ministry’s press service said. Ukrainian businesses pay all taxes, while some goods sold through foreign marketplaces reach consumers without VAT being charged, the ministry said.

Removing the VAT exemption for parcels worth up to €150 ($175) would help minimize abuses, including the splitting of shipments, and reduce the shadow segment of the market, said Oksana Shvets, deputy head of strategic development for European integration at the American Chamber of Commerce in Ukraine.

Ukraine is being offered a softer model than the European Union’s, with VAT applied without additional customs duties, said Bohdan Slutskyi, an economist at the Center for Economic Strategy.

The European Union will also introduce a fixed duty on parcels from non-EU countries starting in July 2026, Slutskyi said. For most goods, VAT will be automatically included in the price at the purchase stage on marketplaces.

Noncommercial parcels or gifts worth up to €45 ($53) will not be taxed. VAT will still have to be paid on that amount if the shipment contains perfume, coffee or tea, the Finance Ministry said.

What is the scale of untaxed foreign parcels in Ukraine?

Ukraine’s budget could lose UAH 27 billion ($613 million) in 2026 if the VAT is not introduced

Potential VAT revenue losses could reach UAH 27 billion ($613 million) in 2026, the Union of Ukrainian Entrepreneurs said, citing a study by the Institute for Socio-Economic Transformation. The annual volume of preferentially taxed parcels is growing by 50% a year, the union said.

The total volume of tax-exempt transactions stood at UAH 23 billion ($522 million) in 2022 and reached almost UAH 93 billion ($2.1 billion) in 2025.

Chinese and Polish companies are the main senders of international postal and express shipments to Ukraine. Ukraine received 55.7 million shipments from China’s Temu, AliExpress and Cainiao in 2025, accounting for 74% of the market, according to data from the Institute for Socio-Economic Transformation.

Polish companies Answear, LPP, Modivo and MakeUp sent 10.8 million parcels to Ukraine, or 20% of the market.

Ukrainians most often use international parcel services to order clothing, footwear, electronics and accessories, and cosmetics, the institute said.

“The vast majority of these goods are already produced in Ukraine — including by 20,000 clothing and footwear manufacturers and 200 toy manufacturers,” the institute said.

If the bill is passed, the tax on parcels from €0 would include an import duty of 10% of the value of the goods and 20% VAT, the Finance Ministry said.

The measure could bring in up to UAH 10 billion ($227 million) in budget revenue each year, the ministry said. Those funds could be used, among other things, to finance Ukraine’s security and defense sector, the ministry said.

Budget revenue from introducing VAT on parcels from €0 would amount to UAH 19 billion ($431 million), the Institute for Socio-Economic Transformation estimated.

There is a risk that some gray schemes could grow, but it would not be decisive if the rules are properly administered, Shvets said.

The EU’s experience shows that changes to cross-border trade taxation rules did not lead to a systemic increase in smuggling, she added.

How would Ukrainian businesses benefit from the new VAT?

A “soft protectionist effect”

“For us, this means fairer competition, because every parcel without VAT means a lost sale for a Ukrainian store and less work for legal businesses,” Intertop CEO Serhiy Badritdinov said.

Goods on AliExpress and Temu are now 20% cheaper than goods on the Ukrainian market, Citrus CEO Artem Shevchenko said.

Domestic sales in Ukraine could rise by 20% to 25% overall, he said.

Ukrainian businesses would benefit because they would receive more equal competitive conditions, Badritdinov said.

Passing the bill would support the development of legal imports and encourage investment in Ukrainian retail, logistics and local production, the European Business Association’s press service said.

Much will depend on the user experience on international platforms, Shevchenko said. If those platforms remain convenient for Ukrainians, they will continue buying goods in lower-average-check categories, he said.

At the same time, the introduction of an additional tax will discourage some consumers and push them back to Ukrainian platforms, he added.

Sales will grow for Ukrainian manufacturers and marketplaces, but the scale of that growth remains to be seen, Badritdinov said.

“The new tax could reduce demand, because higher prices for imported goods may lead some customers to abandon orders or reduce their volume,” Nova Poshta’s press office said.

For the market, the change would mean a redistribution of flows, as some shipments would move to alternative or unofficial delivery channels, the company added.

Nova Poshta and Ukrposhta have already discussed technical and operational preparations for the new rules with relevant parliamentary committees and the Finance Ministry.

The changes would require IT integration with customs authorities and marketplaces, additional procedures for collecting and verifying data, and the possible involvement of logistics operators in tax administration, Nova Poshta said.

“We are ready, for example, to introduce customs brokerage services to simplify this process,” the company said.

Ukrposhta can quickly adapt its processes to the new requirements while minimizing the impact on customers, the company’s communications department said.

“We have experience adapting quickly, including during updates to U.S. customs rules,” Ukrposhta said.

The measure would have a fairly noticeable soft protectionist effect, economist Yuriy Hadai said. Introducing VAT on parcels from €0 would also reduce Ukraine’s negative trade balance by several percentage points, supporting macroeconomic stability, he added.

The new rules would take effect no earlier than Jan. 1, 2027, even if the bill is adopted in 2026, the Finance Ministry said.