VAT for Sole Proprietors: Quarterly Reporting, Consolidated Tax Invoices, and Ministry of Finance Changes

VAT for Sole Proprietorships: Ministry of Finance Proposes Quarterly Reporting, Consolidated Tax Invoices, and a New Audit Threshold

On August 6, 2026, the Ministry of Finance published for public discussion a draft amendment to the Tax Code concerning VAT administration. The main proposals for entrepreneurs are as follows: Sole Proprietorships — VAT payers would switch from monthly to quarterly VAT returns; certain indicators in VAT returns and tax invoices would be pre-filled using data from the State Tax Service; the threshold for a specific ground for an unscheduled documentary audit would increase from UAH 100,000 to UAH 1 million; and sales and prepayments from customers — non-VAT payers would be allowed to be combined into one consolidated tax invoice per month.

These rules are not yet in effect. The published document is only a draft, so Sole Proprietorships — VAT payers currently continue to report monthly and issue tax invoices under the existing rules. It is also important to note that this draft does not introduce mandatory VAT registration for all Sole Proprietorships and does not establish a new threshold after which every simplified-tax-system taxpayer automatically becomes a VAT payer. It primarily concerns the procedures for entrepreneurs who are already registered as VAT payers or who acquire this status under other provisions of the Tax Code.

What Exactly the Ministry of Finance Proposes to Change

Quarterly VAT Return for Sole Proprietorships

Under the current paragraph 202.1 of the Tax Code, the VAT reporting period is one calendar month. The monthly VAT return must be submitted within 20 calendar days after the end of the month.

The Ministry of Finance proposes establishing a calendar quarter as the reporting period for individual entrepreneurs — Sole Proprietorships registered as VAT payers. This means that instead of reporting for each individual month, an entrepreneur would report for the quarter.

At the same time, VAT returns should not be confused with tax invoices. Switching the VAT return to a quarterly reporting period does not in itself mean that all tax invoices could be issued or registered once per quarter. The draft separately provides only for the possibility of issuing a monthly consolidated tax invoice for transactions with non-VAT payers. Other transactions would remain subject to the rules of Article 201 of the Tax Code unless they are changed in the final law.

If the draft is adopted in the proposed wording, the amendment to Article 202 of the Tax Code is expected to take effect from the first day of the quarter following the month in which the law is published. Other provisions of the draft are proposed to take effect on the day following its publication.

Automatic Pre-Filling of VAT Reporting: What Is Actually Proposed

The wording «automatic VAT return» may create the wrong impression. The draft provides for the possibility of pre-filling certain indicators in VAT reporting and tax invoices for Sole Proprietorships — VAT payers, rather than automatic submission of a VAT return without the entrepreneur’s participation.

The Ministry of Finance previously explained that this service-based approach would use information already available to the State Tax Service, including ECR data, tax invoices, and other information. The entrepreneur would receive pre-generated indicators in an electronic environment.

Therefore, even after such a mechanism is introduced, Sole Proprietorships will still need to reconcile the pre-filled indicators with their own records of sales, returns, prepayments, input VAT, and registered tax invoices/adjustment calculations. The draft itself does not establish a rule under which a pre-filled VAT return is considered automatically submitted.

VAT Audit Threshold Proposed to Increase from UAH 100,000 to UAH 1 Million

Current subparagraph 78.1.8 of the Tax Code allows an unscheduled documentary audit in cases specified by the Code related to a claimed VAT budget refund and/or a negative VAT amount exceeding UAH 100,000. In July 2026, the State Tax Service explicitly applied this threshold when auditing taxpayers that declared a negative VAT amount exceeding UAH 100,000.

The Ministry of Finance draft proposes increasing the relevant threshold to UAH 1 million.

This does not mean that amounts below UAH 1 million cannot be audited by the tax authorities at all. The change concerns one specific ground for an unscheduled documentary audit provided for by subparagraph 78.1.8 of the Tax Code. Other lawful grounds for tax control remain separate.

For retailers, this is particularly relevant when a significant amount of input VAT, purchases of large batches of goods, equipment, imports, or other transactions result in a negative VAT amount in the return.

One Consolidated Tax Invoice per Month for Customers — Non-VAT Payers

This change is particularly important for retail businesses, but it must be properly distinguished from the current rules.

At present, paragraph 201.7 of the Tax Code establishes the general rule that a tax invoice is issued for each full or partial supply of goods or services, as well as for a received prepayment. At the same time, paragraph 201.4 already allows consolidated tax invoices to be issued for continuous or recurring supplies. For customers — non-VAT payers, such an invoice may include the entire volume of the relevant supplies for the month. A supply to the same customer two or more times per month is considered recurring.

In addition, for retail trade, the current Tax Code allows a tax invoice to be issued based on daily transaction totals, including sales of goods for cash to an end consumer — a non-VAT payer, with the payment processed through an ECR/PECR, provided that separate tax invoices have not been issued for such transactions.

The Ministry of Finance draft proposes expanding this simplification: a VAT payer would be able to issue, no later than the last day of the month, one consolidated tax invoice for supplies of goods/services to customers who are not registered as VAT payers and/or for prepayments received from them.

For a store with a large number of sales to end consumers, this could significantly reduce the number of tax documents. However, the consolidated tax invoice would still be monthly, not quarterly.

Example from State Tax Service Practice

In March 2026, the State Tax Service clarified a situation involving continuous provision of services to customers — non-VAT payers. Under the current paragraph 201.4 of the Tax Code, a supplier may issue, no later than the last day of the month, one consolidated tax invoice for the entire volume of such supplies if they are continuous. If the prepayment received exceeds the value of the services actually supplied, a separate rule applies to the excess prepayment amount. The Ministry of Finance draft proposes broadening the right to issue a monthly consolidated tax invoice for non-VAT payers.

A Consolidated Tax Invoice Does Not Replace an ECR/PECR Receipt

For a retailer, this distinction is essential. A tax invoice is a VAT accounting document, while a fiscal ECR/PECR receipt confirms a specific payment transaction with a customer.

Therefore, if a store is required to process sales through an ECR or PECR, the possibility of issuing one consolidated tax invoice at the end of the month does not cancel the fiscalization of each transaction to which the ECR Law applies. The Ministry of Finance draft dated August 6 does not provide any separate exemption for retailers from using ECRs/PECRs. For a registered VAT payer, the fiscal receipt must, among other things, contain the VAT rate and the total VAT amount with the appropriate designation.

Therefore, if the new rules are eventually adopted, the process for a regular retail sale may look as follows: the customer receives a fiscal receipt at the time of payment, while the seller prepares VAT documents separately under the new rules.

Does This Draft Introduce Mandatory VAT for All Sole Proprietorships

No. The August 6 draft concerns VAT administration and does not itself change the current mandatory registration procedure established by Articles 181–183 of the Tax Code.

Under the current paragraph 181.1 of the Tax Code, a person must register as a VAT payer if the amount of taxable supplies of goods and services over the previous 12 calendar months exceeds UAH 1,000,000 excluding VAT. At the same time, this provision expressly contains an exception for single-tax payers of groups one through three.

For group three of the simplified taxation system, the current Tax Code provides two basic single-tax rates: 3% of income with VAT paid separately or 5% of income when VAT is included in the single tax. Therefore, a group-three Sole Proprietorship may operate as a VAT payer under the model provided by the Code.

Other public discussions concerning a possible future VAT reform for the simplified taxation system should not be confused with this specific draft. Until the relevant amendments enter into force, tax obligations are determined by the current Tax Code.

What Remains Mandatory for a Sole Proprietorship — VAT Payer

Until any possible amendments enter into force, entrepreneurs continue to operate under the current rules: the VAT reporting period is one calendar month; tax invoices and adjustment calculations are prepared and registered in the Unified Register of Tax Invoices under Article 201 of the Tax Code; retail payments are processed through ECRs/PECRs in cases established by Law No. 265/95-VR; and the fiscal receipt of a VAT payer must correctly display the required VAT details.

For failure to submit or late submission of a tax return, paragraph 120.1 of the Tax Code establishes a fine of UAH 340 for each violation, and for a repeated similar violation within one year after a fine has been imposed — UAH 1,020 for each failure to submit or late submission. Separate liability for violations of the registration deadlines for tax invoices and adjustment calculations is established by Article 120¹ of the Tax Code and the relevant transitional provisions of the Code. The August 6 draft does not cancel this liability.

Therefore, until the law actually enters into force, there is no need to switch to quarterly reporting, stop issuing current tax invoices, or change the fiscalization procedure for sales.

VAT, Tax Invoice, and PECR Accounting in Torgsoft for Retail

Torgsoft supports work with both VAT payers and non-VAT payers. The software allows users to create and print tax invoices, generate them when goods are sold, select the responsible person, keep records of tax invoices, and work with documents when goods are returned.

To generate tax invoices correctly in Torgsoft, VAT rates and codes are specified in the product type settings. The software has a tax invoice register and supports exporting selected documents to XML, including for further processing in M.E.Doc, and also supports export in the government-standard format for Art-Zvit. In the settings of the software ECR in Torgsoft, VAT and excise tax types are available, while the tax under which a specific product is sold is determined through the product type card.

Torgsoft documentation confirms the availability of tools for current VAT accounting, tax invoices, and PECR operation, but provides no grounds to consider the provisions of the draft law that have not yet entered into force as already implemented: a quarterly VAT reporting period for Sole Proprietorships, new pre-filling of indicators by the State Tax Service, and the expanded rule for a monthly consolidated tax invoice. Until the law is adopted, there is no need to change accounting procedures to comply with future rules; once the final text appears, businesses should use the Torgsoft version in which the relevant legislative changes have been implemented and verified.

What Entrepreneurs Should Consider Now

A Sole Proprietorship that is not a VAT payer has not acquired any new obligation to register for VAT as a result of the publication of this draft. A Sole Proprietorship — VAT payer continues to submit monthly returns and work with tax invoices/adjustment calculations under the current rules until the Tax Code is actually amended.

For retail businesses, the most practical change if the draft is adopted would be the possibility of combining transactions with customers — non-VAT payers into one consolidated monthly tax invoice. A quarterly VAT return would reduce the reporting frequency, but it would not eliminate the need for ongoing sales accounting, fiscal receipts, control of VAT rates, or proper preparation of primary documents.

Official Sources

1. Ministry of Finance of Ukraine. Draft Law of Ukraine «On Amendments to the Tax Code of Ukraine to Improve the Administration of Value Added Tax», published on 06.08.2026:
   https://mof.gov.ua/uk/Draft_regulatory_acts_for_discussion_in_2026

2. Tax Code of Ukraine dated 02.12.2010 No. 2755-VI — subparagraph 78.1.8 of Article 78; Articles 120, 120¹; paragraph 181.1 of Article 181; Article 183; paragraph 187.1 of Article 187; Article 201; Articles 202–203; paragraph 293.3 of Article 293:
   https://zakon.rada.gov.ua/laws/show/2755-17#Text
   The current rules for monthly VAT reporting are confirmed by the State Tax Service.

3. Law of Ukraine «On the Use of Registrars of Settlement Transactions in Trade, Catering and Services» dated 06.07.1995 No. 265/95-VR — in particular, Articles 3 and 17:
   https://zakon.rada.gov.ua/laws/show/265/95-%D0%B2%D1%80#Text

4. Order of the Ministry of Finance of Ukraine dated 21.01.2016 No. 13 «On Approval of the Regulation on the Form and Content of Settlement Documents/Electronic Settlement Documents…» — Section II, including the requirements for mandatory details of a fiscal cash register receipt and VAT display:
   https://zakon.rada.gov.ua/laws/show/z0220-16#Text

5. State Tax Service of Ukraine. Clarification on issuing a tax invoice to non-VAT payers for continuous supplies, 03.03.2026 — application of paragraphs 201.4 and 201.7 of the Tax Code, consolidated tax invoices, and tax invoices based on daily transaction totals:
   https://kyivobl.tax.gov.ua/media-ark/news-ark/987201.html

6. State Tax Service of Ukraine. Clarification on mandatory VAT registration when UAH 1 million is exceeded, 06.02.2026 — paragraph 181.1 and Article 183 of the Tax Code, exception for single-tax payers of groups one through three:
   https://zak.tax.gov.ua/media-ark/news-ark/979319.html