Article: ”New Property Tax Law”

July 25, 2012

TO: Clients and Friends of the Firm

FR: Galina Khmarksaya, Esq.

RE: The New Ukrainian Property Tax Law 

Until recently, residential property owners in Ukraine did not need to pay any property tax whatsoever. At long last, however, the government has passed legislation designed to remedy this significant loophole in its ongoing tax collection efforts. 

Henceforth, as of July 1, 2012, owners of apartments with residential area less than 240 square meters or private houses with residential area under 500 square meters, have to pay property tax in the amount of 1% of the minimal salary (currently 1,102 UAH; revised as of January 1 each calendar year) for each sq. meter of such living area. Moreover, owners of apartments with residential area in excess of 240 sq. meters and private houses with 500 sq. meters or more will now have to pay a tax in the amount of 2.7% of the set minimal salary for each sq. meter of residential area. 

At the same time, Article 265 of the Tax Code of Ukraine grants some privileges related to paying this real estate tax. For instance, the taxation base may be reduced once per year for a single object owned by an individual as follows: for apartments – by 120 sq. meters; for residential houses – by 250 sq. meters. The final amount for individual owners will be determined by the local tax authorities based on information contained in the State Register of Immovable Property Rights, while legal entities will independently determine the real estate taxation base. 

The above real estate tax must be paid once per year by individuals and once per quarter by legal entities. The amount is determined by the tax inspection at the place where such real estate is registered. Although this process has not yet been tested in practice, according to legislation it is fairly straight-forward: the tax inspection simply prepares “notification-resolution,” which includes the necessary payment requisites, and sends it to the taxpayer at the actual address of the property prior to July 1st of each fiscal year. The individual taxpayers are obliged to pay the above-described tax within a 60-day period as of the date of receiving such notification-resolution. 

If a taxpayer fails to pay this property tax within the established 60-day period, Article 126 of the Ukrainian Tax Code stipulates that such taxpayer shall be subject to a fine. According to tax inspection representatives, the amount of such fine is still under consideration among the state authorities. In addition, Article 129 of the Ukrainian Tax Code allows late payment fees to be imposed in case an individual taxpayer fails to effectuate the property tax payments within the established 60-day term. 

In summary, as of July 1, 2012, each owner of a residential dwelling in Ukraine (apartments and houses) is required to pay property tax. While on the one hand, no one is eager to pay additional taxes, and face foreseeable disputes with the tax authorities, on the other hand, citizens of other civilized countries have been paying property taxes for decades. Therefore, this new addition to Ukrainian arsenal of taxation is in line with similar legislation in other nations. 



Frishberg & Partners 2022