The city of Kyiv ranks first among other cities in terms of the number of construction of residential complexes and office business centers in Ukraine. Quarantine restrictions, the severity of which changed situationally through the prism of the number of patients with COVID-19, from March 2020 to the present have affected the capital’s real estate market. Rental rates for offices have decreased to a greater extent and rates for residential real estate have not decreased at all. Quarantine put everyone in jobs at home, business centers were emptied, but residential real estate remained virtually stable. While most non-residential owners provided vacations to tenants or halved rents, apartment owners felt little of a market crash.
Investing in an apartment for rent in the capital today is more profitable and less risky than opening a bank deposit or buying securities in the form of domestic government bonds. The average bank deposit rate in hryvnia is 7-9%, while the investment income from rental housing can reach 15% in dollars, subject to the involvement of expert lawyers in investment activities. In European countries, these rates are twice lower, and therefore we are constantly approached by non-residents in order to obtain the services of a qualified lawyer for real estate investment.
Investing in residential real estate for a non-resident can be done by:
The current legislation does not set any restrictions for non-residents to conclude such agreements.
A foreigner must be legally present in the territory of the state to enter into asset acquisition agreements. Of course, it will be easier if you have a temporary or permanent residence permit, but this condition is not mandatory. The main thing is that such a foreigner has a valid passport document with the mark of the border service on the date of crossing the border. Such a passport is subject to translation into Ukrainian.
Since the registration of taxpayers is conducted by tax numbers, so to carry out future financial transactions, a foreigner must obtain an identification number. The procedure for assigning a number is not complicated, and issues are resolved by the tax authorities within 3 days.
The next question after choosing the optimal investment scheme is the method of calculation. A possible option is to transfer using the international payment system SWIFT from a foreigner’s account to the seller’s account. The cost of the transfer is approximately from 0.5 to 2%. If you need a partial settlement with the seller in cash, a foreigner can open an account in Ukraine and receive funds at a bank branch. We remind you that all settlements on transactions are made in the national currency – hryvnia, so by transferring foreign currency to the seller’s account you need to make a conversion. If a foreigner crosses the border, the transfer of currency values in the amount equal to or exceeding the equivalent of 10 thousand euros is subject to mandatory written declaration to the customs authorities.
Typically, the services of an investment lawyer may include inspecting the seller and the object of sale for restrictions and prohibitions; verification of debts for maintenance of the object of sale and persons registered at the address; ordering and obtaining a cost estimate and technical passport of the object. In the case of investment in a new building, the analysis of risk aspects is broader and additionally includes: legality of construction, land use rights and the presence of lawsuits in which the construction customer participates.
Now let’s analyze the costs of registration of the purchase of real estate in the standard way – a notarized contract of sale.
However, the legality of requiring a person who buys housing for the first time in the state to pay a pension is questionable. After all, such an exception is directly provided by law, and this condition can be confirmed by appropriate evidence of the person’s personal statement and information from the unified register of property rights. Competent notaries, if they submit the necessary documents, do not require payment of the pension fund. That is, the costs of a foreign buyer to purchase are virtually absent.
It should be taken into account that in the future, if a foreigner sells real estate, the income tax will be 18%. Therefore, to optimize the tax burden, provided that you plan to earn on the resale of real estate, it will be advantageous to register the object in the ownership of a legal entity, the founder of which will be a non-resident. And to sell real estate by selling corporate rights in this company.
By purchasing real estate, qualified lawyers will help to apply to organizations that maintain the house and provide utilities to enter into contracts on behalf of the new owner. A foreign investor does not need to engage in routine affairs, because a real estate lawyer on the basis of a power of attorney can not only fulfill this order, but accompanies the conclusion of the lease agreement and establish an optimal model of net income from the delivery of property.
As for the real estate tax, we advise you not to hurry with appeals to the tax authority. After all, it is the tax authorities who are obliged to make the accrual and inform about the need to pay the tax. Currently, the administration of real estate tax works intermittently, even for residents.
The statute of limitations for tax collection may not exceed 3 years. The approach to real estate taxation of foreigners is the same as for citizens. However, you do not need to inform the tax office or submit any reports.
The Kyiv City Council has set a tax rate of 1 sq.m. in the amount of 1.5% to the minimum wage at the beginning of 2021 (UAH 6,000)
Tax exemption: for an apartment, regardless of their number – 60 square meters. meters. Thus, for example: if you own one apartment of 100 square meters. m. tax assessment for 2021 is as follows:
100 sq.m. – 60 sq.m. = 40 sq.m. – object of taxation.
40 sq.m. * 90 hryvnias = 3600 hryvnias – the amount of tax for the year.
The fact of acquisition of real estate by a foreigner cannot be a ground for obtaining a certificate of temporary or permanent residence. One of the reasons for obtaining a temporary certificate is the establishment by a foreigner of a company with a share capital of at least the equivalent of 100 thousand euros. Real estate can be contributed to the authorized capital after its acquisition in the name of a foreigner. We advise you not to consider such a privilege to resolve the issue of obtaining a temporary certificate as a significant argument. After all, there are several other legal, and most importantly simpler and cheaper ways to obtain a license. We repeat the registration of real estate for the company, it is advisable under short-term plans to resell it in the future.
Lawyers are ready to offer legal models for deriving a net profit of a non-resident from renting real estate within 3% of the income.
Under the general approach, income in the form of rent is taxed at a rate of 18 and there are strict currency restrictions. Our specialists have proven models for optimizing the derivation of the offspring. Only after agreeing with the investor on the terms and only within his instructions, lawyers will take on the burden of supporting all bureaucratic issues with tenants and set the priority – the actual receipt of the largest investment return.