Ukraine: Taxes and Costs

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Taxes in Ukraine are moderate to high

Effective Tax Rate on Rental Income
Monthly Income	€1,500	€6,000	€12,000
Tax Rate	15%	15%	15%
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Rental Income

Gross rental income earned by nonresidents is taxed at 15%.

Rental agreements with a lessee-individual not registered as a private entrepreneur must be notarized.

If the lessee is a business entity, the entity is obliged to withhold standard rate tax from rent payments to an individual lessor not registered as private entrepreneur.

When income from renting real estate is declared, the amount declared cannot be lower than minimum rental fee determined according to the methodology established by the Cabinet of Ministers of Ukraine, though the declared amount may of course be higher (if the real contractual rent is higher).

Non-resident landlord registered as a private entrepreneur

An non-resident landlord, as an individual entrepreneur, may opt for the simplified tax (unified tax) regime provided that his gross income does not exceed UAH500,000 (€73,617). Under this regime, the individual is required to pay lump sum amounts every month, typically between UAH20 (€2.94) and UAH200 (€29). The exact monthly liability, which serves as the individual’s income tax, depends on the municipality where the property is located.

VAT

Leasing a building, premises or land is subject to standard VAT at 20%.

Land Tax

Land tax is levied on Ukrainian land and property at 1%, payable by the owners or users of the property. The taxable value is the property value at the beginning of the calendar year. If the value of the property cannot be determined, land tax is levied at a specific amount per sq. m.

Corporate Route

Companies earning profits from renting real estate are taxed at the standard corporate tax rate of 25%. All expenses incurred in respect of business activities are deductible for corporate tax purposes. Repair or renovation costs may be depreciated. However, limited amounts of expenses related to fixed asset repairs or renovation (up to 10% of the book value of a building) can be deducted immediately for tax purposes.

Depreciation

Quarterly depreciation charges are computed on the basis of the reducing-balance method. The applicable depreciation rate depends on the type of asset and the date when it was purchased.

Buildings purchased prior to 1 January 2004 are depreciated at 1.25%, while buildings purchased after 1 January 2004 are depreciated at 2%.

Capital Gains Tax

As of 1 January 2007, capital gains realized from sale of dwellings (houses, apartments, summer houses) measuring 100 sq. m. or less are exempted from tax. A 1% tax is levied on the capital gains of dwellings with sizes exceeding 100 sq. m. The taxable gain is computed as selling price less the acquisition cost of the property.

Capital gains earned on the second and any additional sale of similar real estate property (any size) within the same tax year are subject to 5% tax.

Corporate Route

Capital gain should be included in the entity’s gross income for a given reporting period and can be reduced by the entity’s deductible expenses. All expenses incurred by entities in respect of their business activities are deductible for corporate tax purposes.

VAT

The sale of buildings or premises is subject to 20% VAT.

Ukraine - more data and information

• Guide to buying houses and registering property sales in Ukraine

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