Every second Ukrainian buys an apartment in a new building not to live in it, but to earn money from it.
Renting out real estate has always been profitable. This is passive income that does not take much time and effort from the business owner. Depending on the area rented out, you can earn decent money every month.
In this article we will tell you:
- why it is important to rent out real estate officially;
- who can do it;
- how to more profitably pay taxes on rental income;
- where it is more profitable to open a rental business.
Why is it important to rent out real estate "white" ?
Until September 1, 2022, Ukraine still has a tax amnesty on assets purchased with money on which taxes and other mandatory payments were not paid. About who can benefit from this amnesty, which assets can be declared and how to "whiten" your money, we told you
in this video.
Starting from 2022, the State Tax Service of Ukraine will tighten control over Ukrainians' incomes and will apply indirect verification methods to identify undeclared incomes of citizens. Ukrainians will have to pay taxes even on forgiven debts, loans and private money transfers from other countries.
Among the incomes subject to strict scrutiny are cash inflows from renting out real estate.
Of course, "unofficial" landlords have been hunted before. But there are all reasons to believe that now tax inspectors will take them on in earnest. With new forces after forced rest, when due to quarantine restrictions the government announced a moratorium on business inspections.
The fine for tax evasion varies depending on the amount of underpayment to the treasury. Over a year, a substantial amount can accumulate and the fine will be —
from 85 to 170 thousand hryvnias (as of 2021).
Who can officially rent out real estate
If you rent out not one apartment, but more, register your entrepreneurial activity. According to the Law of Ukraine No. 755, this can be done by contacting the state registration body in the local administration or intermediaries.
According to the Law of Ukraine, the following can rent out real estate:
- individuals;
- individual entrepreneurs on the simplified system (single tax) — 2nd and 3rd tax groups (FOPs in Ukrainian)
Individuals
If real estate is rented out by individuals, they do not need to register as entrepreneurs. However, they will have to report their income and pay taxes:
- by May 1 submit a property declaration and the amount of income from it for the entire previous year;
- by August 1 — pay PIT (personal income tax) and military levy on income.
Individuals pay the state:
- personal income tax (PIT) — 18 % of the rental amount;
- military levy (ML) — 1.5 % of the rental amount.
FOPs on single tax 2nd and 3rd tax groups
These entrepreneurs can rent out real estate
with restrictions on the total area of premises —
no more than 400 sq.m. They are also required to:
- monthly pay the single tax and ESC (single social contribution for compulsory state social insurance);
- submit income reports to
