Ukraine Begins Large-Scale De-Shadowing of Housing Rental Market

The Ministry of Community and Territorial Development, together with experts from the Recovery and Reforms Support Team (RST), has submitted a draft law amending the Tax Code aimed at combating the shadow housing rental market.

According to the agency, the document proposes simplifying the taxation mechanism for income derived from renting out housing, as well as significantly reducing the tax rate for renters. A special emphasis is placed on supporting internally displaced persons – in the case of renting housing to IDPs, the draft law provides for exemption of the renter from paying tax and the obligation to submit a declaration.

According to the State Tax Service, only 900 citizens declared over 16 million hryvnias in income from renting out housing in 2024, which amounts to less than 3 million hryvnias in tax to the budget. This situation is explained by a high tax burden, procedural complexity, and a lack of incentives for legalizing rental relationships.

Changes in the law will also simplify the process of providing state assistance to internally displaced persons who rent out housing. Providing assistance will only be possible if an official rental agreement is concluded.

The developed draft law aims to create a clear and convenient taxation model for renters, make official housing rentals more economically viable, protect the rights of internally displaced persons through transparent agreements, and ensure increased budget revenues through voluntary declaration.

The concept of the document has already been presented to international partners, including the IMF and the World Bank, as well as to the Verkhovna Rada Committee on Finance, Taxation and Customs Policy. After the registration of the draft law in the Verkhovna Rada, its parliamentary processing will begin.

Changes to the Tax Code regarding the taxation of housing rentals propose simplifying procedures and reducing tax rates for renters, as well as aim to enhance accountability and transparency in this area, promote the legalization of rental relationships, and improve conditions for internally displaced persons.