Tax Relief for Landlords Approved by Parliament
Ukraine's parliament, the Verkhovna Rada, has passed draft law No. 15111-d in its second reading and final vote, significantly cutting the tax burden for individuals who rent out property. The new regulations apply to both housing and commercial real estate, aiming to bring the rental market out of the shadows and into the formal economy.
Under the approved legislation, tax rates for individual landlords are reduced. Previously, the tax burden stood at 23%, which pushed many property owners to avoid signing official contracts and refrain from declaring rental income. As noted by Olena Shuliak,
“because of the high 23% tax burden, property owners often avoid official contracts and fail to declare rental income.”She added that the new rules
“encourage the legalization of the rental market, without which we cannot fully implement the new housing policy.”
The lower tax rates will allow individual landlords to pay less on their rental earnings. These preferential conditions apply to all types of real estate, whether residential or commercial. Currently, around 56,000 individual entrepreneurs (known as FOPs in Ukraine) rent out property under the simplified tax system. In contrast, only 900 Ukrainians declared income from residential rentals two years ago.
The law will take effect after being signed by the president and officially published. Additionally, the Verkhovna Rada passed draft law No. 15111-d concerning the taxation of income earned through digital platforms, including taxi services, delivery apps, rental accommodations, and online marketplaces. This reform is intended to support the growth of Ukraine's legal economy.
Impact on the Real Estate Market
Lowering the tax burden for landlords could have a major effect on the real estate market. Legalizing rental income may lead to higher budget revenues and help develop new housing policies, which is especially important amid rising demand for housing. Greater participation by individuals in the legal rental market could be a key step toward stabilizing Ukraine's economic situation.
As the Ukrainian government takes steps to enhance the rental market, it is also addressing the income generated from digital platforms. This is exemplified by the recent approval of a law targeting taxation on earnings from services like ride-hailing and online rentals. Such measures not only aim to integrate various sectors into the formal economy but also provide clarity for citizens navigating these new regulations. For more insights on how these changes will affect everyday transactions, read about the taxation of income from digital services.