Real Estate in Ukraine. Taxation.

Taxes from the deal:

In case of buying, buyer pay usually 1 % (there are two taxes paid  – duty 1 %  and pension fund tax 1 % from deal price, divided between parties). 

In case of sale, the following taxes are to be paid:

Residential estate, apartment:

– personal income tax 18 % (resident pays instead 5 %).

– military tax 1,5 %

BUT if individual (either resident or non-resident) owns property for more than 3 years and for the last 1 year didn’t sell any other real property, there is no tax. 

Additionally as was mention above, when the deal is made – should be paid duty 1 % and pension fund tax 1 % from deal price (usually these are paid 50/50 by seller and buyer). 

Commercial estate, offices etc:

– personal income tax 18 % (resident pays instead 5 %).

– military tax 1,5 %

The above rates applies to residents and non-residents independently on the term they own estate and the fact of sale of estate during a year.

Additionally, when the deal is made – should be paid duty 1 % and pension fund tax 1 % from deal price (usually these are paid 50/50 by seller and buyer). 

In case of rent. Individual pays from rent payments the taxes:

– personal income tax 18 %  – military tax 1,5 %

Individual should submit tax return annually till 1 of May of the following year (next one) and pay tax (PIT) till 1 of August of the following year. 

In case company rents from individual – it pays his taxes being its agent. Still individual is obliged to submit tax return (fine for not doing this is 170 UAH). 

When and if rental is to be transferred to non-resident owner abroad, withholding tax (at rate 15 %) should be applied.

2. The buyer is individual (either resident or Ukraine or non-resident having registered address in Ukraine), who is registered as private entrepreneur

In this case the property is advised to be bought on individual (not private entrepreneur). So the tax consequences in case of buying and selling will be the same as described above. 

But for rent, the private entrepreneur shall pay 5 % from income and also social tax (in 2018 it is 2457 UAH per quarter and changes once the Government changes minimal official salary).  

Private entrepreneurship (PE) doesn’t give rights to non-resident to become resident, to stay in Ukraine longer than 90 days per 180 days etc. 

3. The buyer is LLC

You may solely or together with partner register LLC, which will buy the real estate. At the moment you can buy share of LLC for nominal price, but we expect changes already in 2019. 

If non-resident invests more than 100 000 EUR per non-resident individual in share capital of LLC, this provides you the right to get either temporary or permanent residency in Ukraine. 

Corporate profit tax is 18 % and will be calculated based on income and expenses. 

Taxes on ownership

Residential estate, apartment:

The law provides in 2018 that the real estate tax should be paid in case the person owns apartment of more than 60 sq.m or private house of more than 120 sq.m. Or 180 sq.m. totally in case of owing both apartment and house. The tax rate is 1,5 % from minimal official salary (now it is 3723 UAH per month, so 1.5 is 55,84 UAH), per each meter above this minimal quantity of meters. In case the apartments are more than 300 sq.m and houses 500, the rate is plus 25000 UAH per each object.  

Commercial estate, offices etc:

The rate of real estate tax is conditional, depends on decision of local authorities (if there is no decision, there is no tax). The maximum rate is 1.5 % from official minimum salary (in 2019 it is 4173 UAH, 1.5% is 62.595 UAH) per meter.

4. Rent of real estate

The property can be rented by legal entity, representative office of foreign company or private entrepreneur (individual, who is the owner of property as an individual). There are some limitations on real estate, which can be rented by the private entrepreneurs. The private entrepreneur can provide this activity being on a common system of income tax (18+1,5% of tax from profit) or on 3rd group of single tax, which is 5 % from income.

The limitations regarding size of property starting from January 1, 2021 are as follows:

  • rent of land up to 0,2 hectares;
  • rent of residential property up to 400 sq.m.
  • rent of non-residential property up to 900 sq.m.

Residential status

Please note that the above rates for residents and non-residents are stipulated in Tax Code of Ukraine, which also has definition who is considered to be resident. Here is tax residency matters, which is not equal to citizenship.

If a foreigner becomes tax resident of Ukraine at the date of sale, he is entitled to tax rates applicable to residents of Ukraine.

Out of definition it is clear that temporary residency by itself doesn’t provide the right to become tax resident of Ukraine. There are additional measures to be taken to become resident. We provide more detailed consultancy on this questions as our experts are tax lawyers and financial specialists.

Double Taxation Treaty 

DTT between Ukraine and the state of owner should be considered when income is to be tranfered from Ukraine to the seller or rentor abroad.

We would be pleased to consult you more in details for your particular case.

Kateryna Timchenko

Managing Partner, Lawyer
Laudis Tax&Legal