International shopping tax: how new rules will change prices, the operation of marketplaces, and state budget revenues
For a Ukrainian buyer, a foreign parcel up to 150 euros has long become synonymous with profitable shopping, but for the national economy this “preferential” corridor has turned into a zone of systemic discrimination. While a foreign marketplace is exempt from paying VAT when importing such goods, a Ukrainian retailer is forced to include this tax in each price tag, automatically losing in the competition on its own field.
A market without borders or tax fairness: the main dilemma of online trading
According to a study by Info Sapiens, 55% of respondents today support establishing equal conditions for Ukrainian and foreign sellers, which will become a tool for combating “gray” imports and a source of budget replenishment. However, the state faces a difficult task of bringing tax legislation closer to European standards and at the same time supporting domestic producers, without provoking a sharp jump in the cost of purchases for millions of citizens who are already preparing for the inevitable increase in the cost of international parcels.
A study of consumer behavior of Ukrainians reveals a paradoxical picture, since despite the deep integration of international shopping into everyday life, society demonstrates a clear demand for fiscal justice. Statistics show that the vast majority of citizens, namely 79% of those surveyed, have experience with cross-border purchases, and almost a third of respondents (31%) do this systematically – from one to several times a month. The remaining 48% turn to foreign marketplaces episodically, limiting themselves to orders once every few months.
Interestingly, the consumer basket in this segment remains quite conservative, since clothing, footwear and household goods confidently hold the leadership, accounting for 51% of requests. In contrast, specific categories such as “automotive goods or tools” attract less than 5% of the audience, while military goods and small accessories interest only 3% and 1% of buyers, respectively.
Analyzing the priorities of the population, it becomes clear that the conditions of international delivery are at the center of public attention. 54% of respondents agree with the thesis that identical VAT taxation is necessary for imported and local goods, while only 32% maintain an oppositional opinion regarding both of these initiatives.
The current exemption, which allows not to pay taxes for parcels worth up to 150 euros, is perceived by the majority as a factor that destroys the internal market. So, against the backdrop of these sentiments, the Verkhovna Rada Committee on Finance, Tax and Customs Policy on May 6 has already taken a step towards change, recommending for adoption draft laws No. 15112-D and No. 12360, which aim to level the playing field for all trade participants.
It is no coincidence that these two legislative acts are considered a single package, as they form a holistic legal ecosystem for distance sales. The logic of the legislators is to create equal conditions for trade, because for a long time foreign online retailers had a de facto advantage over domestic businesses due to gaps in the taxation of imported shipments. Now, by introducing clear rules for calculating VAT and simultaneously strengthening control over the efficiency of customs authorities, the state is trying to eliminate this imbalance.
In addition to the purely market aspect, this initiative has a pronounced defense context. Streamlining the rules for cross-border trade is seen as a reliable source of additional budget revenues, which is critically important for the stable financing of the Defense Forces. Thus, the reform goes beyond simple tax administration, turning into a tool for economic security and supporting the national manufacturer in wartime.
Ukraine closes the tax loophole of marketplaces: what does this mean
For years, Ukrainian retailers, who pay 20% VAT on the first hryvnia of the cost of goods, have been at a known disadvantage compared to foreign platforms. The abolition of the 150 euro limit should stimulate domestic demand for goods already in warehouses in Ukraine. For the budget, this means billions in revenues, which under martial law are automatically converted into a defense resource. The expansion of benefits for armed UAVs is especially symbolic, because it is an example of how tax policy quickly adapts to the technological needs of the front.
On the other hand, for the average consumer, the “invisibility” of the tax is quite conditional. Although the mechanics of receiving a parcel will not change, the mathematics of the price will become less attractive. The actual increase in the price of small orders by 20% may lead to a decrease in purchasing activity in the segment of inexpensive goods (accessories, electronics, clothing), which were previously “social” imports for many Ukrainians.
The new model shifts the burden of the tax agent to marketplaces (the so-called IOSS model operating in the EU). This is a progressive step, because instead of forcing customs to administer millions of small packages, the state receives funds directly from AliExpress or Temu. This step will minimize corruption risks at the border and queues at post offices.
However, the success of this model critically depends on how easily foreign platforms agree to register in Ukraine. If the mechanism for appointing a non-resident representative turns out to be too bureaucratic, some smaller international players may simply block delivery to Ukraine so as not to burden themselves with additional reporting.
Maintaining the limit of 45 euros for “citizen-to-citizen” parcels is a necessary safeguard to prevent the transformation of assistance from relatives abroad into a tax object. At the same time, strengthening the assessment of the effectiveness of customs authorities under project No. 11360 aims to block schemes of “crushing” commercial consignments of goods into hundreds of small parcels to front persons – a practice that has laundered funds from the budget for years.
Analytical calculations by Crowe Mikhailenko specialists emphasize the criticality of the situation, pointing to the annual laundering of at least 17 billion hryvnias from the state budget, which actually subsidize foreign manufacturers instead of supporting the domestic economy. Ukrainian retail, forced to include VAT, customs duties and payroll taxes in the price of goods, loses in the price war of products that enter the country without any tax burden. Such a model not only hinders the development of local brands, but also stimulates “gray” schemes, when large batches of goods are artificially divided into small shipments to bypass customs control.
The vector of movement towards European Union standards dictates the need for decisive steps, because European practice has long since abandoned preferences for small international postal imports, protecting its own manufacturer. However, the use of such mechanisms in Ukraine faces stiff resistance from technological giants and bureaucratic obstacles. Despite the efforts of the relevant parliamentary committee to transform marketplaces into tax agents that would automatically collect VAT at the time of purchase, global corporations do not demonstrate readiness for such integration. In particular, Amazon’s position, voiced in political circles, indicates its reluctance to assume the role of tax registrar in Ukrainian jurisdiction, which jeopardizes the rapid implementation of an automated payment collection model.
Expectations from the introduction of new rules in society are quite pragmatic, since 59% of reform supporters expect an increase in budget revenues. In addition to the fiscal effect, 58% of respondents see this as a tool to support legal Ukrainian business, 56% seek equal conditions for all sellers, and 52% hope to block the channels of “gray” imports. An important argument for 51% of respondents is also the harmonization of Ukrainian legislation with European standards, although this desire for order is accompanied by a sober understanding of the consequences: 57% of respondents are fully aware that the price of such justice will inevitably be an increase in the price of international purchases.
As we can see, the analysis of public sentiment indicates a deep gap, because in words people advocate justice, but in practice they are afraid that it will hit their wallets. Customers of Temu and other platforms express justified fears that fiscalization will lead to an increase in the price of specific goods, which often have no analogues on the domestic market or are presented with a significant markup.
Discussions on public platforms, in particular on Reddit, signal the risks of trade going underground and additional pressure on small entrepreneurs, which may negate the expected positive effect on the budget. Ultimately, the conflict between the “equal rules” model promoted by the state and citizens’ desire for access to cheap imports remains open, requiring the authorities to strike a delicate balance between filling the treasury and preserving consumer loyalty.
Duty-free limit as a threat: why Europe abandoned it
For a long time, maintaining the duty-free import limit at 150 euros created the illusion of accessibility, but behind the facade of cheap gadgets and clothing, a systemic threat to domestic entrepreneurship was hidden. While a Ukrainian workshop or factory is forced to take into account payroll taxes, environmental fees, and import duties on raw materials in the cost of products, cross-border retailers have been supplying finished products for years without a single cent of tax burden. This imbalance has turned postal channels into “black holes” for the economy, through which billions of hryvnias leak out every day, leaving domestic producers in an unequal struggle for survival on their own turf.
The EU example demonstrates the rejection of the previous liberal approach in favor of strict regulation. In particular, in 2021, the limit of 22 euros for duty-free import of goods was completely eliminated, which made it mandatory to pay VAT on every purchase. Brussels realized that even insignificant parcels, multiplied by millions of copies, can destroy entire sectors of light industry and small retail within the Union. Instead of playing populism, the Europeans introduced the IOSS system, which obliges large marketplaces to automatically charge tax at the time of transaction, turning global players into tax agents of their states. This approach immediately filled budgets by billions of euros, and also leveled the playing field. From now on, sneakers from a local store and a similar pair from an Asian site carry the same fiscal burden.
The Ukrainian system on this path is catastrophically lacking both decisive steps from government officials and technological synchronization with EU customs protocols, which makes our borders transparent for the mass “crushing” of commercial consignments under the guise of private shipments. The state critically needs to recognize that the lion’s share of postal traffic is a systemic business, which should be taxed on an equal footing with traditional imports. For a real breakthrough, the country must not only reduce the numbers in the laws, but also implement a digital infrastructure capable of identifying the real recipient and summarizing his orders over a certain period, making schemes with “pounds” and fake persons impossible.
The path to Europe requires Ukraine to adopt a reasonable model of economic self-preservation, where supporting the national brand begins not with slogans, but with the same rules for all market participants. The rejection of excessive postal benefits will become the very litmus test that will show whether the state is ready to build a sustainable economy or whether it will continue to remain a raw material supplement that finances someone else’s industrial development at the expense of its own future. Only through integration into the common EU fiscal space and the creation of barriers to uncontrolled imports will the country be able to give local entrepreneurs a chance to grow into global participants in trade processes.
