The government is lowering taxes on housing rental: what will change for landlords and displaced persons.

Over 90% of residential rental agreements in Ukraine are made unofficially. This attitude raises concerns among legislators who seek to legalize this sector.

According to the head of the Verkhovna Rada Committee on State Governance, Local Self-Government, Regional Development and Urban Planning Olena Shuliak, the main reason is the high tax rate. Landlords have to pay 18% personal income tax and 5% military tax, a total of 23%, which is one of the highest tax burdens among passive incomes.

Consequences of the shadow rental market

An unofficial agreement may seem beneficial, but at a critical moment, the tenant's rights remain unprotected, and the landlord risks facing legal issues.

"Both the person renting an apartment suffers, as their rights are unprotected, and the one renting it out"

The absence of a contract deprives the tenant of the right to compensation, registration of residence, and access to state aid.

Tax burden will change

The Ministry of Communities and Territories Development is preparing a draft amendment to the Tax Code aimed at simplifying the process of legalizing housing rentals, reducing tax rates, and encouraging voluntary legalization.

The proposed model includes reducing the tax rate, exempting landlords from taxes when renting to displaced persons, and simplifying income accounting for homeowners.

Legalizing housing rental is beneficial for displaced persons

According to the State Tax Service, in 2024, only 900 citizens declared income from rentals amounting to 16 million UAH, which provided less than 3 million UAH in tax revenues. This indicates a significant risk of tax evasion.

The draft law also includes protections for internally displaced persons so they can officially rent housing and access state aid and compensation.

Legalizing housing rental should become a convenient and beneficial taxation model to stimulate voluntary legalization.

Ukraine has a problem with unofficial residential rental agreements, leading to a low level of protection for the rights of tenants and landlords. Legalizing this sector and changing the tax burden can help improve the situation and encourage voluntary legalization while protecting the rights of all parties involved in the agreement.