New military duty: taxes on real estate transactions have almost doubled
2 December 2024 10:25
The Verkhovna Rada has significantly increased taxes, and for most Ukrainians, the military duty has risen from 1.5% to 5%. The new fee, which came into effect on December 1, applies to most real estate transactions. In particular, all transactions that are subject to personal income tax will now include a 5% military duty. This was reported by the President of the Association of Realtors of Ukraine (ARU) Olena Haydamakha on Facebook, "Komersant Ukrainian" reports.
The new rules, which introduce a 5% military tax on certain real estate transactions, create a significant financial burden on both sellers and buyers.
According to her, “it is still difficult to imagine how the real estate market will react to this, how the amount of supply and demand will change or not change, and what will happen to prices.”
The changes affect a wide range of transactions, including:
1. All properties where the ownership is less than 3 years and all new buildings, so it is all transactions on eHomes (except for inheritance)
2. If it is the second or more sale of real estate in a calendar year
3. If it is a sale of commercial real estate
4. Non-residents and foreigners, if it is a gift or inheritance.
“I can say for sure that it will not get easier for buyers. Especially for buyers under government programs. After all, such transactions have nuances: waiting time for approval and financing, inconveniences with withdrawals by sellers. And owners usually agree to these inconveniences, provided that the buyer pays their taxes. And now the amount of taxes will be almost twice as much,” explained Haydamakha.
She also shared her personal experience:
“I was supposed to have a mortgage deal, but it didn’t happen (banks, hello, but that’s another story). And in the evening, the law was signed and an additional $2,500 was paid by the buyer. By the way, he is a military man and could have been exempt from paying the military fee. But he is the buyer, and the owner, who is not entitled to any benefits, has to pay the military tax. And he agreed to sell under a mortgage only if the buyer pays the taxes.”
The expert believes that the real estate market will experience significant fluctuations in the near future. On the one hand, the number of transactions may decrease, on the other hand, the price of objects may rise due to increased taxes.
At the same time, the additional funds for the state budget look impressive.
“If we assume that in every region, except for the occupied ones, at least 10 transactions with a military tax occur every day, with a real estate value of $50,000, then the state budget will receive $500,000 every day. And in a month (working days), this is $12 million. I only hope that the funds will reach those who need them so badly now, and not end up in someone’s warm pocket,” said the President of the Ukrainian National Union of Realtors.
As a reminder, the military fee is a mandatory payment that was temporarily introduced in 2014 to finance Ukraine’s defense needs.
It should be noted that President of Ukraine Volodymyr Zelenskyy signed a law on tax increases. The law provides for an increase in the military tax on all income of Ukrainians from 1.5% to 5%.
Increased military tax
According to the new law, which was signed by the president last week, the fee is levied on the income of all individuals in Ukraine.
The increase will affect many transactions and operations: salaries, sick leave, dividends, cryptocurrency sales, royalties, income from the sale of property, if more than 1 transaction per year, royalties, severance pay, rental income, and charitable assistance.
Employers are obliged to accrue and pay the tax.
The funds received as a military fee are transferred directly to the state budget.
Who does not pay the military fee
According to the law, the military and employees of agencies belonging to the security forces, as well as all persons participating in the defense of Ukraine against Russian aggression, do not pay the military fee.
The military fee is not levied on the following income: maternity payments, inheritance and gifts from relatives of the first degree of kinship, sale of property (if 1 transaction per year), alimony, housing subsidies, and business trip compensation.
