The capital hosted a conference entitled “Business on the Front Line: Tax Policy, Sustainability, and Recovery of the Frontline Economy,” organized by the Ukrainian Council of Resilience and the Association of Frontline Cities and Communities. The event brought together more than 30 representatives of the country’s leading business associations, leaders of frontline cities, and entrepreneurs to discuss critical issues of economic survival on the front line.

The central event of the conference was the signing of a Memorandum of Cooperation between the Ukrainian Business Council, which unites 126 business associations with 27,000 member enterprises, and the Association of Frontline Cities and Communities, which has been joined by over 300 frontline communities.

Ihor Terekhov, Mayor of Kharkiv and Chairman of the Association of Frontline Cities and Communities, opened the conference by emphasizing the critical situation for the economy of the frontline territories. He reported that 127,000 entrepreneurs are currently working in Kharkiv—more than before the war, which testifies to the city’s resilience. Mr. Terekhov noted the need for more effective lending to businesses in frontline regions under the 5-7-9 program, under which frontline regions have currently received only 13% of the total volume of loans. The mayor spoke about incentives for business operating in frontline Kharkiv, in particular the abolition of local taxes and fees in Kharkiv. The relevant decision has been extended to the first quarter of 2026.

For businesses that have left frontline territories, the head of the APMG proposed a 50/50 tax distribution mechanism between the community from which the business relocated and the community to which it moved.

Grigol Katamadze, president of the Taxpayers Association of Ukraine and member of the Supervisory Board of the Ukrainian Business Council, criticized the initiative to introduce VAT for sole proprietors.

“I don’t understand who the authors of this bill are, where they live, how they come up with such ideas. Currently, 90% of sole proprietors are completely self-employed people who do not abuse the system,” said Grigol Katamadze.

He stressed that the signing of the memorandum with the Association of Frontline Cities will be one of the most important events in the 10-year history of the Ukrainian Business Council, as the frontline territories protect the entire country. Mr. Katamadze also called for international investment forums on Ukraine’s recovery to be held directly in frontline cities so that investors can experience the real living and business conditions.

Oleksandr Chumak, president of the Association of Private Employers, presented a preliminary analysis of the consequences of introducing VAT for individual entrepreneurs in Kharkiv. According to his calculations, the city may lose about one billion hryvnias in revenue to the local budget due to shadowing and relocation of businesses.

“In the first 10 months of 2025, the city received 3.2 billion hryvnia in tax revenues in the form of a single tax, which accounts for 26% of tax revenues. If VAT is introduced for sole proprietors, the city could lose a third of this amount,” said the president of the Association of Private Employers, inviting representatives of the Ministry of Finance to visit Kharkiv to see for themselves how entrepreneurs work in a frontline city.

He sent an official request to the Kharkiv City Council asking them to bring up the issue of not introducing VAT for sole proprietors, especially during martial law.

Boris Emeldesh, president of the All-Ukrainian Professional Association of Entrepreneurs, proposed alternative ways to fill the budget. He cited data that the de-shadowing of the tobacco market (19% shadow economy, UAH 25 billion in losses per year), alcohol market (16.2% shadow economy, UAH 8 billion in losses per year) and fuel (19% shadow economy, UAH 10 billion in losses per year) could bring in about UAH 45 billion annually—more than the expected VAT revenues for sole proprietors. Mr. Emeldesh stressed that VAT administration would cost about 100,000 hryvnia per year for a single enterprise, which is an unbearable burden for small businesses. Together, this amounts to UAH 100-120 billion per year in unproductive losses for all entrepreneurs. He proposed introducing criteria to combat business fragmentation instead of general taxation of all sole proprietors.

Yevgen Katrich, member of the supervisory board of the Kharkiv IT Cluster and founder of WebSpark, drew attention to the situation on the IT sector labor market. According to the Djinni portal, there are 81,000 candidates for 9,000 vacancies—almost 10 times more.

“All these people work as freelancers, are self-employed, and pay taxes as sole proprietors. But if VAT is introduced, it will be unprofitable, and people will simply go underground,” the expert warned.

He also stressed the importance of supporting not only the export activities of IT companies, but also their work in the domestic market, in particular with Ukrainian enterprises.

Eduard Golodnitsky, president of the International Advisers Association, called for the implementation of European experience in the tax sphere. He noted that in the EU, the threshold for VAT registration is between €40,000 and €85,000, not UAH 1 million, as proposed in Ukraine. Mr. Golodnitsky emphasized the need to simplify VAT administration according to the European model, where any document with 10 details can be considered a VAT invoice, and the report consists of only four fields. At the same time, Eduard noted that most European countries are not at war, so the directives need to be adjusted to take into account Ukrainian realities.

Tetiana Dumenko, deputy chair of the Fuel and Energy Business Association, spoke about the critical situation of the fuel infrastructure in the frontline areas. The advance payment of 30,000 to 60,000 hryvnias from each retail fuel outlet does not take into account the security situation and geographical location.

“There are 800 residents left in the Chuhuiv district. A thousand liters of fuel are sold per day, if that is already a great achievement. There is no profit, taxes are paid from working capital or personal savings,” said the deputy chair of the Fuel and Energy Business Association.

She stressed that entrepreneurs continue to work solely because of their civic position, having no moral right to leave residents and the military without fuel, effectively subsidizing the business with their own funds.

Konstantin Ivanov, president of the Chernihiv Chamber of Commerce and Industry, presented objective arguments for the introduction of special economic regimes in frontline regions. Since March 2022, 506 enterprises of various forms of ownership in the Chernihiv region have been directly affected by shelling, and this number continues to grow. According to his estimates, more than 70% of air raid alerts in Ukraine occur in the frontline belt from Chernihiv to Odesa.

“A third of the alerts occur during the working hours of enterprises operating in one shift. The alerts take away our economic component — the time we can work,” Ivanov said.

He also cited alarming statistics: in the first nine months of 2024, 166,000 people left Ukraine and did not return, and in just a month and a half (from October to early December), another 128,000 left.

Myroslav Laba, an expert at the Economic Expert Platform, drew attention to the technical aspects of business relocation. He explained that the current Tax Code provides for a change in the place of tax payment only at the end of the year, so in order to implement the idea of a 50/50 tax distribution, changes must be made to allow businesses to change their allocation during the year. The expert also suggested using the experience of the Lviv region with the “Side by Side” initiative, where communities are assessed based on their assistance to frontline territories, and called for dialogue between financially capable communities, where businesses are relocating, and frontline communities that need support.

Oleksandr Popov, head of the Kharkiv Regional Organization of Employers in the Defense Industry, outlined the dual challenges facing defense industry enterprises in frontline regions. These enterprises not only face the typical problems of frontline businesses, but are also targets for the aggressor.

“The Security Service of Ukraine sends information that the enterprise will soon be bombed, and then the Ministry of Emergency Situations arrives and looks for fire hydrants. The mood of the employees is so-so, but Kharkiv is working,” Popov noted ironically.

He sharply criticized the Defense City law, which requires defense industry enterprises to be located in Zakarpattia in order to receive benefits, considering this unfair to enterprises that continue to operate directly in frontline cities.

Mr. Popov proposed a number of specific measures:

• the introduction of 100% state guarantees for enterprises in frontline regions with state orders;
• cancellation of the National Bank’s requirement for third-party guarantees for frontline territories;
• extension of state guarantees to the restoration of premises, not just the purchase of equipment;
• cancellation of the restriction on five legal entities per grant recipient for frontline regions.
• simplifying financial monitoring requirements, as entrepreneurs’ cards are being blocked en masse in Kharkiv, and introducing a moratorium on inspections and the assignment of risk status to enterprises in frontline areas.

Oleksiy Radchenko, co-founder of the IT company Raccoon Gang and director of Prozori Solutions, raised the critical issue of the work of higher education institutions in frontline regions. He warned that the Cabinet of Ministers’ resolutions are effectively leading to a reduction in the number of technical universities, which businesses have always relied on. According to him, IT companies registered in Kharkiv continue to prioritize recruiting personnel from the region, as they have built relationships with local universities over the years. Radchenko also stressed the importance of maintaining a 100% reservation quota for frontline territories as a magnet for returning employees.

Following the conference, participants formulated a number of specific proposals:

Regarding VAT for sole proprietors: preventing the introduction of such regulation until the end of martial law; if introduction is inevitable, raising the threshold to a level not lower than European standards (85-100 thousand euros, or about 5 million hryvnia per year).

Special status for frontline territories: introduction of preferential lending conditions under the 5-7-9 program (reduction of rates to 1-3%); zero customs duties and VAT on imports of fixed assets for production needs; fixed tariffs for gas and electricity distribution; revision of the normative monetary valuation of land, taking into account the security situation.

Support for relocated businesses: amendments to the Tax Code to allow for a change of tax payment location during the year; a 50/50 tax revenue distribution mechanism between the community of origin and the community of relocation.

For defense industry enterprises: 100% state guarantees for loans to enterprises in frontline regions with state orders; abolition of the requirement for third-party guarantees; expansion of Defense City to enterprises located in frontline regions.

Human capital: maintaining a 100% reservation quota for frontline territories; enabling universities to operate offline with appropriate security infrastructure; state subsidies for businesses to purchase shelters.

Administrative simplification: moratorium on inspections in frontline regions; simplification of financial monitoring requirements; abolition of automatic assignment of “risky enterprise” status.

Ihor Terekhov summed up: “The economy of the state and our future depend on how we defend the interests of business in frontline cities and communities and throughout Ukraine. The damage from the war ranges from $600 billion to $1 trillion, and no reparations will cover such costs. If we do not create conditions for businesses to operate transparently, honestly, and without excessive tax and administrative burdens, nothing will happen.”

The memorandum of cooperation between the Association of Frontline Cities and Communities and the Ukrainian Business Council creates an institutional framework for systematic lobbying of the interests of businesses and territories on the front lines of the economic war.