The Rada has reduced the property rental tax to 5%: what will change for landlords
9 June 22:44
The Verkhovna Rada has approved a reduction in the personal income tax rate for citizens who officially rent out residential or non-residential real estate. From now on, instead of 18% personal income tax, landlords will pay 5%. This was announced by Olena Shulyak, chair of the parliamentary Committee on State Administration, Local Self-Government, Regional Development, and Urban Planning, according to "Komersant Ukrainian"
According to her, the relevant amendment was introduced into draft law No. 15111-d, which generally concerns the taxation of income received through digital platforms.
How rental income will now be taxed
Under the adopted amendment, income earned by an individual landlord from renting out residential or non-residential real estate will be taxed at a 5% personal income tax rate.
In this case, the landlord must:
- file an annual tax return based on the results of the year;
- pay the tax to the budget on their own.
Thus, the government is offering more favorable terms for those owners of residential or commercial real estate who are willing to operate officially.
Watch us on YouTube: important topics – without censorship
Why this decision is considered important
According to Olena Shulyak, the housing rental market has largely remained in the shadows due to an excessively high tax burden. Previously, property owners who wanted to officially rent out their homes had to pay:
- 18% personal income tax;
- 5% military tax.
In fact, the total tax burden amounted to 23%. This is precisely why many landlords avoided formal contracts and did not declare rental income.
Following the changes, the personal income tax rate is reduced to 5%, and together with the military levy, the burden will amount to 10% instead of 23%.
“Reducing the personal income tax rate to 5% may make the formal registration of rental agreements less burdensome for property owners. It is expected that the lower tax rate (5% plus 5% military levy—effectively 10%, instead of 23%) could create a simpler and clearer incentive for landlords to enter into contracts, declare income, and operate within the legal framework,” Shulyak emphasized.
What this will mean for the rental market
The new rate is expected to make the formal registration of rental agreements less burdensome for property owners. This should encourage:
- the signing of formal lease agreements;
- income reporting;
- the formalization of the housing market;
- more transparent operations by property owners.
According to Shulyak, without legalizing the rental market, it will be difficult to fully implement the new housing policy in Ukraine, particularly social rental mechanisms.
By the end of 2024, only 900 Ukrainians had declared income from renting out housing. Another 56,000 sole proprietors rent out property under the simplified tax system.
For a country with a housing stock of millions of units, this means that the bulk of the rental market operates in the shadows.
That is why reducing the tax burden is viewed by parliament as one of the key steps toward legalizing this segment.
How this relates to housing reform
Olena Shulyak noted that a large-scale housing reform is currently underway in Ukraine. Its goal is to move away from outdated Soviet approaches to housing provision and transition to more modern European models.
Social rental housing is intended to be one such tool. But without bringing the rental market out of the shadows, this mechanism, according to Shulyak, will not function fully.
Read us on Telegram: important topics – without censorship
