Ukraine's PM: 80% of duty-free foreign parcels were used to dodge taxes

Ukrainian Prime Minister Serhiy Koretsky said in an interview with the 1+1 television channel that roughly 80% of low-value international parcels entering Ukraine without VAT were actually being used as a scheme to split larger shipments into smaller ones, allowing dishonest traders to avoid tax obligations.

According to Koretsky, this practice has been damaging to Ukrainian businesses. He explained that domestic manufacturers produce goods under wartime conditions, often relying on diesel generators for power, which makes electricity — and therefore production costs — significantly higher than in Europe or other countries from which the cheap parcels originate. On top of that, Ukrainian-made goods are subject to VAT under current law, while the incoming parcels have so far been exempt, creating an unfair price gap.

The prime minister argued that such a situation should not be allowed to give foreign manufacturers a competitive advantage over goods that can be produced successfully and to a high standard within Ukraine. He thanked lawmakers for backing the legislation, calling it a first step, and noted that a second reading in parliament is expected soon.

Background

On September 16, Ukraine's Verkhovna Rada approved in first reading two bills introducing VAT on e-commerce and international parcels. Under the proposed rules, VAT would apply to parcels valued up to 150 euros, which had previously been exempt.

Passage of this legislation is a condition for Ukraine to receive $700 million under an International Monetary Fund program, as well as 3.7 billion euros as part of a broader 90-billion-euro loan package from the European Union. The new rules could take effect no earlier than July 1, 2027, and only following a corresponding government decision.