The Verkhovna Rada of Ukraine has taken a decisive step to bring the housing rental market out of the "shadows." The parliament has adopted draft law No. 15111-d, which radically changes the tax burden on individuals officially renting out real estate. The initiative, supported by deputies, aims to encourage apartment and house owners to legalize their income through a significant reduction in tax rates.
From 23% to 10%: The New Tax Reality
The key change concerns the Personal Income Tax (PIT) rates. Currently, landlords working officially pay 18% PIT plus a 5% military levy, totaling 23% of their income. According to the new regulations, the PIT rate for this category of taxpayers will be reduced to 5%.
Taking into account the mandatory military levy, the total tax burden will decrease from 23% to 10%. The administration process remains simple: at the end of the year, landlords will file an annual tax declaration and independently transfer funds to the budget.
Why the Market Went Underground
The main goal of the reform is to motivate owners to register rental agreements. High tax rates have historically been the main barrier forcing the market to function in the informal sector. Statistics confirm the scale of the problem: by the end of 2022, only 900 individuals declared rental income. Another approximately 56,000 landlords operate as entrepreneurs under a simplified tax system (FOP). For a country with a huge housing stock, these figures indicate that the overwhelming majority of the market remains unofficial.
Housing Reform Strategy
Elena Shulyak, Chairman of the Verkhovna Rada Committee on State Power Organization, Local Self-Government, Regional Development, and Urban Planning, who introduced the amendment to the document, emphasized that the rate reduction is not just a fiscal measure. It is a necessary step to implement a large-scale housing reform.
"Ukraine is currently undergoing a large-scale housing reform, the goal of which is to change the Soviet rules for providing housing to those in need to effective European models, including social renting. But we will not be able to launch this tool without detaxing the housing rental market," Shulyak noted.
The state is choosing a strategy of motivation instead of fiscal pressure. The tax reduction is intended to make official transaction registration more profitable and understandable for owners, which in the long term will allow for the introduction of European standards of social tenancy and transparency in the real estate market.