Reports earlier this week suggested the Blues had made a £16 million offer for the 23-year-old, but Villas-Boas has crushed any talk of an offer - although he did not rule out an approach in future.
"I think he's an extremely interesting player but I don't think we are going to progress with our interest," he said. "Because of certain issues. From work permit to the player's valuation, I think our project next year is more important than the actual project at the moment.
"Not that Willian doesn't have the characteristics for the future, we are thinking a lot on what we can do next year. Clubs are asking for a lot of money, and not a lot of money is around in society and in football at the moment. The January market is always extra inflated and you have to take that into account."
Willian, capped two times by Brazil, would have been ineligible for this season's Champions League even if he did sign for Chelsea, as he has already featured in European competition for Shakhtar.
Meanwhile, Villas-Boas has revealed he is not taking an active part in the potential signing of Genk midfielder Kevin de Bruyne. "You have to speak to people at the club regarding that," he said. "Kevin is a player that is club policy, he's a player that is not within my immediate project, he's a player that the club has scouted for quite some time - I'm a manager that respects club policies as well.
"The club has to respect the future, whether it be with this manager or the next manager. Kevin is an extremely interesting player."
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