What taxes are paid when purchasing an apartment in Ukraine

Taxes and fees when purchasing an apartment

The contract of sale and purchase of real estate is drawn up at a notary, who enters information about changes from the owner of square meters in the State Register of Rights to Real Property. From that moment on, the obligation to pay taxes passes to an individual, that is, a buyer. You will have to pay:

Notarial services. There are two options: turning to a private or a public notary. In the second case, you can save a little money, but usually it takes more time to register the sale and purchase of real estate with a public notary. Therefore, it is important to choose whether your priority is time or money.

Pension fund duty. After the conclusion of the transaction, the home buyer must pay a Pension fund duty in the amount of 1% of the purchase amount. The issued receipt of payment should be submitted to a notary, who will take it as a basis for entering information into the State Register. The cost of the service depends on its urgency: 5 working days – UAH 230, 2 days – UAH 2,270, two hours – UAH 11,350.

State fee for certifying a real estate transaction by a notary. It is paid in accordance with the decree of the Cabinet of Ministers of Ukraine “On State Fee” in the amount of 1% of the cadastral value of housing. Notary services (drawing up a contract, entering data into the register) are paid separately.

The tax rate is set by local governments in each region of Ukraine, but cannot exceed 1.5% of the minimum amount per square meter established on January 1 of the reporting year, which is UAH 70.85 per square meter in 2020, UAH 90/sq.m – in 2021. The costs of buying real estate are borne by both transaction parties or one of them, if there are appropriate agreements.

The tax is paid within 14 days from the date of the tax liability. When purchasing an apartment, such an obligation arises in the following circumstances:

• at the time of the conclusion of the contract for the sale and purchase of an apartment – a transfer agreement, and not a preliminary memorandum of sale;
• when filling out an application for registration of a mortgage or concluding a notarial agreement containing a provision of mortgaging.

From the moment the above steps are completed, there are two weeks for settlement with the tax office, that is, for the payment of tax. The tax when buying an apartment from a developer (VAT) is paid on the day of payment of the property value.

Notary fees

The cost of notary services when buying an apartment is a topic faced by everyone who decides to buy an apartment on the primary market. When buying an apartment on the primary market, one often cannot do without a preliminary agreement. Let’s be clear, a developer agreement concluded in the form of a notarial deed is not the same as a preliminary agreement. The preliminary agreement is concluded in order to provide the interests of the buyer and seller. It specifies the date on which the final sales contract was signed. The preliminary contract may or may not be concluded as a title deed.

Who pays for the preliminary contract to a notary if the parties want to conclude it as a title deed? The rules do not indicate who bears the costs in this case. Most often, the notary costs when purchasing an apartment from a developer are divided between the buyer and the seller. These include the costs of preparing a title deed and legal costs associated, for example, with entries in the land and mortgage registers. Additional costs, except for the notary fee, may be for extracts from the title deed. The developer's contract must also include a petition for making an entry in the land and mortgage register. Besides, upon signing the title deed, VAT is charged on the notary fee and the title deed fee.

Property, subject to tax

Obligatory payment of real property tax applies to apartments with an area of more than 60 sq. m. If the area of housing exceeds 60 sq. m, the amount of payment is calculated on the basis of a square that exceeds the minimum established area before tax. For example, for an apartment of 90 sq. m the tax for only 30 sq. m is calculated. For apartments over 300 sq. m. the wealth tax is also obligatory, which is UAH +25,000 plus the amount of the main tax annually.

State fee is not levied on the following real property:

• supported by the local or state budget;
• located in the compulsory resettlement zone;
• in disrepair.

Regarding the purchase of an apartment on the primary market, there can be no conditions under which an exemption from payment of the fee is possible. You should not try to reduce the amount by deliberately lowering the purchase price of the object in the contract. The tax office checks the market value of the premises and usually takes into account the average prices in the given locality. If the sale price of the apartment specified in the contract is significantly lower than the market price (more than 33%), the tax office may require the taxpayer to provide an explanation or to pay tax immediately.

Categories of Ukrainian citizens exempted from paying real property tax

The Cabinet of Ministers of Ukraine by decree No. 7-93 in paragraph 18, art. 4 defined the categories of citizens exempted from paying state fees when buying an apartment:

• orphans;
• dormitory residents;
• religious organizations;
• ATO participants and their families;
• families with 5 or more children;
• disabled children with one parent;
• invalids of the Great Patriotic War;
• victims of the Chernobyl accident (I and II categories).

Residents of the evacuation or compulsory resettlement zone may also be exempted from paying the tax.

Home purchase tax refund

According to Art. 166 of the Tax Code of Ukraine, citizens of Ukraine who buy their housing for the first time or are on the waiting list for an apartment are entitled to tax refund for the purchased property. This can be done only after registration at the address of the purchased property and after submitting a declaration to the fiscal service. This also applies to homes purchased with a mortgage, but with some features:

• official employment - the minimum work experience is 1 year, except for those who work under a civil law contract or are engaged in entrepreneurial activity;
• registration – mortgage housing must be the registered place of residence of a citizen claiming a tax refund;
• mortgage term should not exceed 10 years.

The state reimburses only part of the mortgage interest, excluding the principal of the loan. Also, the amount of annual tax deduction should not exceed the size of the applicant's annual salary, and the area of the apartment should be 100 sq. m or less for maximum compensation. If the housing area is more than 100 sq. m, a decreasing coefficient is applied, the size of the tax deduction is reduced.

If the apartment is purchased with a mortgage, the following additional costs also arise:

Activation fee. This is the amount that must be paid to the bank for the loan granting. Today you can find offers without a fee, but those are aimed at certain categories of borrowers and have additional conditions. The standard fee is 2% of the loan value. The final cost is set by the bank individually, but usually the price for reducing the fee is the need to purchase an additional product, for example, life and health insurance.

Property insurance. This type of insurance is mandatory when applying for a mortgage loan. Such insurance guarantees that in the event of damage to real estate acting as collateral, the bank can receive compensation equivalent to the lost volume of housing liquidity.

Intermediate insurance. Obtaining a mortgage takes from several weeks to several months. This is a risky time for the bank, because the loan was not secured at that time. At this time, the role of temporary security is performed by intermediate insurance - until the mortgage is entered into the land and mortgage register. 

Contact the specialists of RIEL Real Estate Corporation call one of the telephones mentioned or through the feedback form, so that they can help you with the paperwork and organization of the purchase of an apartment.