The bank requires the evidence gathered pertaining to a customer's source of funds when buying an apartment: what you need to know

It is also important to note that RIEL Real Estate Corporation, when providing installment plans, does not require certificates of income or source of earnings, which makes the process of purchasing real estate even more affordable.

How to confirm your earnings: the role of income certificate while purchasing real estate

Let's consider the question of whether a certificate of income is required to purchase an apartment. Earnings confirmation is the process of documenting your financial/property status. To do this, use different documents and sources of information. The main sources of income confirmation include:

• Tax returns. One of the main ways to confirm your earnings is tax returns for recent years. They contain information about your income and expenses.
• Certificate of income from the place of employment. If you are officially employed, your employer may issue you a certificate of income confirming your salary. What does the certificate of income look like? As a rule, this is a document on a special form indicating basic information about the employee and calculating their income for a certain period.
• A copy of the rental contract. If you receive income from rental properties or other sources, then these contracts can also be used to confirm earnings.
• Other sources. Some individuals may have other sources of income, such as investments, dividends or other financial assets, which should be disclosed on the income statement.

To confirm your income, you should contact the relevant authorities to make the necessary paperwork. This process can take some time, so it's essential to start preparing early.

Who needs source of earnings confirmation?

The issue of the earnings confirmation is becoming relevant for many who are considering the possibility of buying an apartment in Ukraine. At the beginning of 2020, there were legislation amendments that affected the conditions for purchasing real estate, in particular apartments. The maximum transaction amount, at which the buyer must confirm the legality of the earnings, has increased from 150 thousand hryvnia to 400 thousand hryvnia. At first glance, such changes might seem like a relief in the process of buying a home, because it allows you to make multiple payments up to UAH 400,000, and in this case the buyer does not have to confirm their income.

However, it should be borne in mind that these changes in legislation also introduced a risk-based approach to financial transactions. This means that financial institutions, including banks, have the right to analyze their clients and check them for compliance with financial monitoring standards. They do this to prevent suspicious financial transactions, since fines for violating financial monitoring rules can reach UAH 135 million.

What amount is subject to financial monitoring? The need to confirm your earnings when purchasing an apartment may arise for any client making a transfer in the amount of UAH 400,000 or more. The likelihood of such a prompt increases in certain cases:

• Cash payment: If the payment amount is paid in cash, the bank may require confirmation of the source of these earnings.
• Lack of sufficient income: If the bank does not see confirmation of your income or your salary is low, this may increase the likelihood of the prompt of confirmation of income.
• Significant difference in amounts: If the transaction amount is significantly different from the usual amounts available in your account, the bank may also consider this suspicious and ask for confirmation.

It is important to note that the bank’s decision may vary in each specific case, and they will not necessarily require confirmation of income every time. However, apartment buyers should be prepared to provide additional information about the source of earnings, especially in the case of large transactions.

What will the tax office check when confirming the source of earnings?

When confirming income to purchase an apartment, it is important to be prepared for an audit by the tax service. The tax service may check:

• Tax return accuracy: are your tax returns true to reality?
• Sources of income: the tax office reviews your sources of income and makes sure they are reflected in your tax return.
• Income and expense amounts: your income and expenses are verified and compared to other financial documents such as bank statements.
• Income from rentals or other sources: if you have income from rental properties or other sources, the tax service may want to check whether it is reported on your return.
• Gift or inheritance: If you received money as a gift or inheritance, this may also be subject to review.

Ensuring that your financial information is accurate and reliable is important to avoid any  awkward situations with the tax authorities when purchasing an apartment.

New rules for the purchase and sale of real estate in Ukraine

On October 10, 2022, new rules for the purchase and sale of apartments in a new building, established by the Law of Ukraine “On guaranteeing property rights to real estate to be constructed in the future,” came into force. These rules introduced changes to the procedure for the acquisition of real estate in new buildings by individuals. Let's consider the main changes and obligations related to these rules.

According to the new law, individuals have the opportunity to purchase real estate in a new building before it is put into operation in several legal ways:

1. Agreement with the customer of construction. An individual can enter into a purchase and sale agreement with a construction customer, who can be a legal entity or an individual entrepreneur, or with a construction developer, who is a legal entity.
2. Participation in the construction financing fund. An individual may enter into an agreement on participation in a construction financing fund with the manager of the construction financing fund through the relevant funds.
3. Issue of target corporate bonds. An individual can purchase corporate target bonds, the retirement of which provides for the transfer of a housing construction object (part of an object). This transfer is carried out on the basis of a notarial agreement between the construction customer and the owner of such bonds.
4. Raising funds through a real estate fund manager. An individual can raise funds (including managing them) through a real estate fund manager.

These requirements are aimed at law enforcement and reliabilization of transactions for the purchase and sale of apartments in new buildings. Such rules are also a means of protecting the interests of buyers and preventing possible situations of double sales of real estate.

Have the new rules for the purchase and sale of real estate striken the market?

The introduction of mandatory confirmation of income and exchange of tax information did not entail significant changes in the real estate market in Ukraine. The market continues to develop and demand for housing remains stable.

How to prepare to confirm the origin of the source of earnings? Tips from RIEL Real Estate Corporation

If you are planning to buy an apartment and verify your income, here are some tips from RIEL Real Estate Corporation.

• Keep all financial documents: it is essential to keep documents such as tax returns, bank statements and income certificates.
• Check your credit score: your credit score may affect your ability to get a mortgage.
• Seek expert advice: talk to a real estate professional or financial advisor who can provide you with personalized advice on confirming your income and choosing the best financial path to purchase a home.
• Prepare for an audit: Be prepared for a possible audit by the tax service. Ensure the accuracy and reliability of your own financial data.
• Comply with the law: remember that tax compliance is very important. Try to manage your finances in accordance with the law and avoid improper tax schemes.