The Verkhovna Rada of Ukraine has supported, on its second attempt, an important legislative amendment that radically changes the taxation rules for income derived from renting out real estate. The new initiative proposes reducing the personal income tax (PIT) rate for landlords from the previous 18% to 5%. This decision was backed by 255 members of parliament during the consideration of draft law No. 16051-1, which initially concerned the allocation of VAT from international postal and express shipments to the needs of the Armed Forces of Ukraine.
New Taxation Terms and Reduced Burden
Currently, Ukrainian property owners who officially declare their income from renting out apartments or commercial premises are required to pay an 18% personal income tax, along with an additional 5% military levy. As a result, the total fiscal burden on landlords reaches a substantial 23%. Once the PIT rate is officially reduced to 5%, the aggregate amount of mandatory budget payments will drop to 10%.
Olena Shuliak, Head of the Verkhovna Rada Committee on State Building, Local Governance, Regional Development, and Urban Planning, explained that the updated preferential rate applies to both residential square meters and non-residential real estate. At the end of the reporting year, the landlord will be required to independently submit a tax declaration and remit funds to the state budget in accordance with the new legislative requirements.
Combating the Shadow Rental Market
Lawmakers attribute the urgent need for such serious changes to the critically high level of shadow activity within the country's rental market. The overwhelming majority of property owners prefer to conceal their income precisely because of the unbearable fiscal burden, fearing severe sanctions from regulatory authorities. Meanwhile, current legislation provides for serious penalties for tax evasion — ranging from 25% to 50% of the unpaid tax amount, while systematic concealment of income can lead to fines of up to 85,000 hryvnias.
Today, the tax service actively identifies cases of illegal housing rentals by monitoring regular bank transactions, analyzing advertisements on specialized real estate platforms, and acting on complaints from vigilant neighbors or dissatisfied tenants. Parliamentarians expect that lowering the fiscal pressure to a manageable 10% will make official contract registration much more profitable and safer for citizens, encouraging them to operate within the legal framework.
Significance of the Reform and Link to the Housing Market
The reduction of the tax rate is viewed by the authorities not merely as fiscal easing, but as a fundamental step toward a large-scale housing reform. As noted in the relevant parliamentary committee, the full deployment of social rental mechanisms and a smooth transition to civilized European models of providing citizens with affordable housing are impossible without the prior de-shadowing of the entire market segment.
It is expected that lowering the tax rate will gradually bring millions of square meters out of the shadows without employing aggressive enforcement methods by the state. This will create transparent and clear rules of the game for all market participants, increase the investment appeal of Ukrainian real estate, and ensure stable revenues for local community budgets in the long term.
