Investment Income – Where to Report and What to Pay

(Appendix: Summary Table)

Investing in Ukraine is becoming a popular way to grow or preserve capital, but it also comes with tax obligations.

In this material, the experts at UHY-Prostir will examine important aspects of taxation related to individual income from investment activities originating in Ukraine, specifically:

1. Dividends in monetary form.
2. Income from the sale of investment assets, including domestic government bonds (hereafter referred to as DGB).
3. Sale of real estate.
4. Sale of unfinished construction projects.
5. Sale of land plots.
6. Income from the lease of land, real estate and movable property.

Taxation of Dividends in Monetary Form

Tax Base – the total amount of accrued dividends.

Tax Rates:

1. Personal Income Tax (PIT):
   • 5% for dividends paid to individuals by companies subject to corporate income tax
   • 9% for dividends paid to individuals by companies that are single tax payers
2. Military Tax (MT): 1.5%

Tax Agent (responsible for calculating and paying taxes) – the company that accrues and pays dividends to an individual. The individual receives the dividend amount net of taxes.

The company that accrues and pays dividends to the individual is also responsible for declaring the amounts of accrued and paid dividends and the taxes withheld.

Please note that if the individual receives other types of income requiring the submission of an annual declaration of assets and income, the declaration must include information about the accrued dividends and the taxes paid on them.

Income from the Sale of Investment Assets, including Government Bonds (DGB)

Tax Base: The investment profit calculated for the calendar year across all transactions involving the sale of investment assets. Investment profit is determined as the positive difference between the income received from the sale of investment assets and the expenses incurred for acquiring such assets. These acquisition expenses must be documented and verified.

Important Note: Income earned from the sale of investment assets during a calendar year is not subject to taxation if the total income does not exceed UAH 4,240 (as of 2024). Additionally, if the overall financial result of operations with investment assets is negative (investment loss), the loss amount can be carried forward to reduce the total financial result of operations with investment assets in subsequent years until fully offset.

Tax Rates:

• Personal Income Tax (PIT): 18%
• Military Levy (ML): 1.5%

Responsible for Tax Payment:

• Professional Trader (including banks) – when an individual conducts transactions involving investment assets through a licensed securities trader.
• Individual taxpayer – responsible for tax reporting independently through an annual declaration.

Special Case: Income from investment profits related to operations with government bonds (DGB) is exempt from personal income tax and the military levy.

The individual is responsible for declaring results from all operations involving the purchase and sale of investment assets during the calendar (reporting) year by submitting an Annual Declaration of Property Status and Income to the State Tax Service of Ukraine.

Income from the Sale of Real Estate

Tax Base – the income derived from the sale of real estate. This income is determined based on the price specified in the purchase and sale agreement but must not be less than the appraised value of the property, calculated using the electronic appraisal determination module of the Unified Database of Appraisal Reports, or the market value of the property determined by an authorized appraisal entity in accordance with the law and specified in the appraisal report registered in the Unified Database of Appraisal Reports. Additionally, the income from the sale may be reduced by documented and verified expenses related to the acquisition of the real estate located in Ukraine.

Tax Rates:

1. PIT:
   • Exempt: Sale of the first real estate property (residential house, apartment or part thereof, room or summer house) in the reporting year, provided it has been owned by the individual for more than three years.*
   • 5%: Sale of a second property within the same reporting year, or if the property has been owned for less than three years.
   • 18%: Sale of a third and subsequent properties in the same year unless the property was inherited, in which case the rate is 5%.
2. ML: 1.5%, applicable for second and subsequent sales within a reporting year.

*The ownership period condition of three years does not apply to properties acquired through inheritance.

Responsible for Tax Payment:

• Individual Seller: If the buyer is an individual who is not self-employed.
• Buyer: If the buyer is a legal entity or a sole proprietor.

Declaration Responsibility:

• Notary: If the buyer is an individual who is not self-employed, the notary ensures proper declaration and payment of taxes.
• Buyer: If the buyer is a legal entity or a sole proprietor.

Sale of Unfinished Construction Projects

Tax Base – income derived from the sale of an unfinished construction project (income from the sale of an indivisible unfinished construction project/future real estate object, divisible unfinished construction project or from the assignment of rights under a purchase agreement for an indivisible unfinished construction project/future real estate object). This income can also be reduced by documented expenses related to the acquisition of such an object or property rights.

Tax Rates:

• Personal Income Tax (PIT):
  1. 18% – Income received from the sale of an unfinished construction project within the reporting year for which partial payment has been made and encumbrances on property rights in favor of the buyer have been registered.
  2. 5% – Income received from the sale of an unfinished construction project during the reporting year if such income was inherited.

It is important to note that if the unfinished construction project is considered part of an already commissioned real estate object (e.g., residential house, apartment or room), the taxation and PIT rates are the same as for the sale of real estate.

• Military Levy (ML): 1.5%

The individuals responsible for tax payment and declaration for the sale of an unfinished construction project are analogous to those for real estate sales.

Sale of Land Plots

Tax Base – income derived from the sale of a land plot, which can be reduced by documented expenses related to the acquisition of the land plot.

Tax Rates:

• Personal Income Tax (PIT):
  1. 5% – For the second sale of a land plot within a single reporting year or if the property has been owned for less than three years.
  2. 18% – For the third and subsequent sales, except when the land plot was inherited by a Ukrainian resident, in which case the tax rate is 5%.
• Military Levy (ML): 1.5%, payable for the second and subsequent sales within a single reporting year.

Please note that Personal Income Tax (PIT) is not applied to the first sale of a land plot in the current reporting year under the condition that the property has been owned by the individual for more than three years*, specifically:

• a land plot that does not exceed the norms for free transfer as defined by its designation;
• a land plot designated for agricultural use, obtained through the privatization process of state and communal agricultural enterprises, institutions, or organizations, or the privatization of land plots that were previously in the individual’s use, or allocated in kind (on-site) to the owner of a land share;
• land plots obtained through inheritance.

*The condition of ownership for more than three years does not apply to inherited property.

The individuals responsible for paying taxes and filing declarations for the sale of land plots are the same as those outlined for the sale of real estate.

Income from Leasing Land, Real Estate and Movable Property

Tax Base:

1. For leasing agricultural land plots, land shares or property shares: The rental payment amount specified in the lease agreement, but not less than the minimum rental payment established by land lease legislation.
2. For leasing real estate (including land plots beneath such real estate or household plots): The rental payment amount specified in the lease agreement, but not less than the minimum rental payment for a full or partial month of lease, calculated using a methodology approved by the Cabinet of Ministers of Ukraine.
3. For leasing movable property: The rental payment amount specified in the lease agreement.

Tax Rates:

• Personal Income Tax (PIT): 18%
• Military Levy (ML): 1.5%

Responsible for Tax Payment:

• The lessee;
• The lessor (individual lessor) – if the lessee is an individual who is not self-employed (not an FOP).

Responsible for Tax Declaration:

• The lessor (individual lessor) – if the lessee is an individual who is not self-employed (not an FOP). In this case, the individual lessor must file an Annual Property and Income Declaration with the Tax Authority of Ukraine for the reporting year.
• The lessee – if the lessee is a legal entity or a sole proprietor.

In this article, we have covered general approaches to the taxation of certain types of income from investment activities sourced within Ukraine, which are received by individuals who are Ukrainian residents. Tax legislation contains numerous nuances and specific features regarding the taxation of various income types. Our advice: for calculating taxes and filing reports related to income sourced both within Ukraine and abroad, we recommend consulting our company via the “Contacts” section or by completing the contact form.