Economy

Why individual entrepreneurs are closing en masse in Ukraine: Hetmantsev explains

Since the beginning of 2025, Ukraine has seen a significant increase in the number of individual entrepreneurs closing their businesses. According to Opendatabot, almost 120,000 sole proprietors ceased operations in the first four months of this year, which is 44% more than in the same period last year.

At the same time, the number of newly established businesses decreased by 9%, with only 81,928 new sole proprietors registered. Thus, there are 1.5 closed businesses for every one opened.

The situation is in stark contrast to last year, when the number of newly opened sole proprietorships exceeded the number of closed ones by 7,166 over the same period. This year, the difference was 37,967 in favor of closed businesses.

Industry specifics and regional distribution

Retail trade remains the most popular industry for new entrepreneurs, chosen by a quarter of all newly registered sole proprietors – 20,763 people. IT and programming consulting is in second place with 7,129 new entrepreneurs, and wholesale trade is in third place with 6,216 new businesses.

The geographical distribution shows that most new sole proprietors appeared in Kyiv – 11.6 thousand (14.2% of the total). The capital is followed by Dnipropetrovska oblast with 7.8 thousand (9.6%) and Lvivska oblast with 6.1 thousand (7.6%) new entrepreneurs.

A characteristic trend in 2025 was the significant predominance of women among new entrepreneurs – they opened 61% of all new sole proprietorships, while men opened only 39%.

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Reasons for the surge in the closure of sole proprietorships

Danylo Hetmantsev, Chairman of the Committee on Finance, Taxation and Customs Policy, explains the situation primarily by changes in tax legislation:

“Non-working sole proprietorships of groups 1 and 2 were closed, as the pre-war rules for paying the unified social contribution were restored. Also, the minimum wage was set at UAH 800 per month for 2025, regardless of whether they are operating or not. Since such sole proprietorships do not conduct any real business, they decide to close down to avoid the tax. At the same time, starting in March 2025, the number of newly opened sole proprietorships (20,029) exceeded the number of those that closed (18,477). The same is true in April: 21,517 new ones – 3,899 more than closed ones.”

Hetmantsev also noted that the change in the number of individual entrepreneurs does not necessarily reflect the economic situation in the country, as the simplified taxation system is often used to minimize taxes or avoid mobilization.

Oleh Hetman, an expert on economic and tax policy, also believes that the changes mainly affected “sleeping entrepreneurs.”

“Of course, active businesses sometimes close down because of the difficulties of working in wartime. Among the key problems in their work, entrepreneurs most often mention a drop in consumer demand, a lack of professional labor, lack of access to cheap financing, and, of course, the danger of war. For active businesses, the military tax of UAH 800 per month is unlikely to be a significant obstacle.”

Future prospects

Experts predict that the trend of closing down inactive sole proprietorships will continue, but the situation will gradually level off. According to Oleg Getman, by the end of 2025, the total number of open and closed sole proprietorships will be approximately the same, unlike in previous years, when more new businesses were created.

It is worth noting that the first week of May showed positive dynamics – the largest number of sole proprietorships opened this year was recorded: 7,014 new entrepreneurs.

It is worth reminding that after the law on tax increase for individual entrepreneurs was passed, an Opendatabot survey showed that 27% of the surveyed entrepreneurs planned to stop their business, which is partially confirmed by the current statistics.

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