Changes in property taxation since 2016. What has changed?
Firstly, previously local authorities were given the opportunity to set benefits. What is a benefit? A benefit is set in the area of an apartment and private house, and tax is levied only if the actual area of the property exceeds this benefit. The Tax Code sets benefits at 60 square meters for apartments and 120 square meters for private houses. Until 2016, local authorities could increase the size of this benefit, and the Odesa City Council set the benefit at 120 square meters for apartments and 250 square meters for individual houses. Since 2016, in Odesa the benefits established by law apply – 60 and 120 square meters.
What do we pay for? How to calculate the area for which property tax must be paid?
The total property area owned is summed. For example, if you own an apartment of 40 square meters and another of 50 square meters, you need to pay tax on 40+50-60 (benefit) = 30 square meters.
Moreover, if you own a part of real estate, the calculation is as follows. For example, you own a half share of an apartment with an area of 80 square meters and a one-third share of an apartment with an area of 90 square meters, then you will pay tax on 80*1⁄2 + 90*1⁄3 - 60 (benefit) = 10 square meters.
If you and your spouse own a 120-square-meter apartment under joint fractional ownership, and each of you has a 1⁄2 share, you have no tax liability.
Conclusion.
How to save on property tax when buying new buildings in Odesa? Sign an investment agreement with the construction company for several family members. Each co-owner will receive a benefit of 60 square meters.
How is the calculation made if you own both an apartment and a house?
In this case, the benefits are summed and amount to 180 square meters. For example, you own an apartment with an area of 150 square meters and a one-eighth share of a house with an area of 160 square meters; in this case, no tax needs to be paid because 150 + 160*1⁄8 - 180 (benefit) = -10 square meters.
Paradox, and the conclusion that can be drawn: if you want to save on tax while owning apartments – buy a share of a house!
How much to pay? What is the property tax rate in Odesa?
The second change that came into force is the maximum tax rate. It now amounts to 3% of the minimum wage set as of January 1 of the current year. Previously it was 2%. Since the tax is local, local councils can independently set the tax rate. In February 2016, the Odesa City Council set the rate at 2%. The minimum wage at the beginning of the year is 1,378 hryvnias. Accordingly, the tax rate amounts to 27.56 hryvnias per square meter of residential property per year.
Who pays the additional property tax?
The third change that came into force in 2016 is an increase in tax by
25 thousand hryvnias for
each apartment exceeding 300 square meters and a house exceeding 500 square meters. Moreover, if you own a
part of such an apartment or house, you are obliged to pay tax regardless of the size of your share. All other co‐owners of such property are also obliged to pay tax for owning it.
If the shares are owned by close relatives, I recommend re‐registering the rights to a single owner. This can be done by a gift agreement. The costs of re‐rec‐
