New system of economic activity classification – let’s figure it out together!

Reforming the classification system of types of economic activity (KVED) has become one of the most significant administrative changes in recent years. The transition to the new version of KVED aims to align the Ukrainian statistical, tax, and regulatory systems with current economic realities and European classification standards. This article will discuss why the need for KVED renewal arose, the main changes, how they will affect businesses, and what actions entrepreneurs and companies need to take.

Why a new system was needed
The previous version of KVED (2010) has essentially become outdated. Over the past ten years, Ukraine’s economy has changed significantly: new sectors linked to digital technologies, green energy, creative industries, logistics, and new types of financial services have emerged. The old codes did not cover these directions, or reflected them too generally, which complicated accounting, analysis, and regulation.

Additionally, Ukraine set a course for harmonizing statistical standards with the NACE Rev. 2 system (the economic activity classification used in the European Union). This means the new Ukrainian KVED is based on the same grouping structure as in EU countries. As a result, Ukrainian businesses will have simplified access to international markets, while government authorities will benefit from a unified system of statistical indicators.

Main principles of the classification update
The new classification system of types of economic activity is built on the following principles:

• Consistency with NACE Rev. 2.
• Detailing of new economic sectors.
• Simplifying registration procedures and eliminating code duplication.
• The possibility for automated database updates in the future.

The structure of the classification remains hierarchical: sections, subsections, divisions, groups, classes. But the number of groups and classes has increased, allowing a more precise reflection of a business entity’s activity. For instance, in information technology, it’s now possible to distinctly separate software development, cybersecurity, cloud services, or data analytics.

Harmonization with European standards
In practice, harmonization with the NACE system has three key outcomes:

1. Statistical accounting: International organizations, such as Eurostat, will receive compatible data, allowing the Ukrainian economy to be assessed using the same criteria as EU countries.
2. Business registration: Entrepreneurs entering the European market will no longer face problems matching activity codes in contracts or tenders.
3. Regulation and control: The government can better monitor the development of new sectors and adapt tax and socioeconomic policies according to real trends.

What will change for businesses
For most existing companies, the renewal of KVED will not require significant legal action. However, every business entity must ensure that its activity is correctly represented in the new classification. If a code has changed or a more accurate analogue has appeared, it will be necessary to update registration documents.

The changes will also have tax implications. In particular, the correct KVED is important when determining:

• The right to use the simplified taxation system (single tax).
• Statistical reporting and classification codes in forms (for example, State Statistics Service reports).
• The appropriate category of insurance contributions for hired employees.
• Activity codes in foreign economic contracts.

During the transition period, tax and statistical authorities will maintain parallel guides matching the old and new codes to avoid confusion in reporting.

How entrepreneurs should act
To transition properly to the new system, experts recommend step-by-step actions:

1. Check the main and additional KVEDs of the enterprise in the Unified State Register.
2. Compare existing codes with the new classification list using the official correspondence table.
3. If necessary, submit an application to the Administrative Services Center or via the “Diia” portal to change KVED in the register.
4. Notify counterparties and update codes in statutory documents, licenses, and contracts.
5. Update information in accounting software and reporting templates.

These steps will not only ensure legal compliance but help avoid potential issues during inspections or contract signings.

Possible risks and challenges
Despite the clear advantages, transitioning to an updated system comes with certain challenges. First, a significant part of small businesses may not immediately adapt to the structure of new codes, especially in complex areas like financial services or IT. Second, in the first months of operation, technical issues are possible—such as discrepancies between codes in the Unified State Register and the tax base.

Risks also include the possibility of incorrect automatic data transfer during registry updates. Therefore, business entities should check their information in open sources.

Economic and legal consequences
At the macro level, the new classification should promote transparent economic processes and improve governmental forecasting. The state will be able to more accurately assess each sector’s contribution to GDP, identify potential risks, budgetary needs, and support directions.

At the micro level, for businesses this means:

• Clearer market positioning.
• Easier access to international financing programs.
• Simplified participation in EU grants and tenders where NACE code compliance is required.
• The ability for statistical comparison of business results with European enterprises.

Law firms and consultants should prepare clients for the transition, run information sessions, and update contract templates that mention KVED.

Summary
The KVED update is more than a technical registry change; it is part of Ukraine’s broader process of economic digitalization and integration into the European economic space. Despite temporary difficulties, the new system will improve data accuracy, reduce bureaucracy, and create conditions for the development of innovative sectors.

Businesses and entrepreneurs should check and update their codes according to the new rules today to ensure a confident and risk-free transition.

Author: Maksym Bahniuk, Head of Tax and Customs Law Practice, Law Firm “WINNER”.
If you have questions or issues regarding KVED determination or renewal, practical code analysis for your business, registration or licensing documentation, or other legal aspects of activity, contact our team. Law Firm WINNER is ready to provide professional support, consultations, and guidance for your business’s successful adaptation to the new regulations.

We will help you:

• Analyze and select the optimal KVED for your activity.
• Conduct individual assessments of problem situations during the transition to the new classification.
• Prepare a document package for register changes and business support.

In today’s realities, it is important to stay informed and act proactively.