1. Back to EU Member states Ukraine Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

2. Back to EU Member states 1. Introduction - Ukraine In spite of crisis real estate in Ukraine is a great investment whether you are planning on reselling or renting. Investing in the Ukrainian property is absolutely of great interest for the investors with those looking for housing focusing on main elite areas such as the capital, Kyiv, the fashionable Crimean coast and the quickly- growing ski resorts of the Carpathian Mountains Reasons to buy in Ukraine - NO Capital Gains Tax on apartments (first property); - NO restrictions for foreign ownership on residential property; - Tiny 1% Inheritance tax; - Minimal purchasing costs; - Minimal maintenance costs; - LOW prices on Real estate.

3. Back to EU Member states 2. Contact Details [Name 1] [firm] [telephone] [email address] [Name 2] [firm] [telephone] [email address]

4. Back to EU Member states 3. Form of property ownership The Constitution of Ukraine and the Civil code of Ukraine identify three forms of property: private property, state property and communal property. Owners have the right to use their property for commercial purposes, leasing, receiving rental payments and receiving profits from other business. Civil code provides several means of acquiring rights to real estate property, the most widely used being sale and purchase agreements or lease agreements. The following real property rights are required to be registered according to Ukrainian law: ownership; proprietary rights: which include right of possession; easement; rights of permanent use of land plot; right of use of land for agricultural purpose (emphyteusis); superficies; leases of real property having a term of three year or more; and limitations of proprietary rights, arising out of mortgages, decisions of courts and other competent authorities, court injunctions. Easement is in general granted for an indefinite period when resulting from a court decision and for a definite period when granted by the agreement. Easement, as a right which affects the property of land, is transferable with the land. The purchaser acting in good faith which acquires the land encumbered with an easement has the same obligations towards the beneficiary of the easement as the initial owner. Therefore, the acquisition of land or buildings requires a careful examination for the existence of easements. Emphyteusis (a right of use of land for agricultural purpose) can be granted on the basis of the agreement. This right may be alienated and transferred as a heritage. Superficies (a right of use of another’s land for construction) shall arise on the ground of an agreement or a will and may be established for definite or indefinite period. Superficies may be alienated by the land user or transferred as a heritage. The transfer of the property right in the land to another person shall not affect the scope of right of the owner of construction (structure) to use the land.

5. Back to EU Member states 4. Taxes and other costs on property acquisition The buyer typically pays registration, notary and other fees but it can be agreed among parties. Notary fees range from UAH75 (€11.50) at state notary and UAH200 to UAH400 (€30 - €62) at private notary. The buyer must also obtain certificates from the Bureau of Technical Inventory and the Center of State Land Cadastre that the property is duly registered. All of these adds to the complexity of purchase process but not much to the cost. Registration and other fees should not exceed 0.05% of the property value. When buying real estate a 1% tax is paid on the sales amount and another 1% is paid to the Ukraine Pension Fund. Buyers and sellers settle on who is to pay these fees and state this in the sales agreement. Real estate agencies typically charge 3-5% of the property price for their services. Finally, buyers may buy an insurance policy on the property for 1% from their real estate agency.

6. Back to EU Member states 5. Issues during ownership Natural persons Taxpayers are: Residents receiving either income originating from the territory of Ukraine or foreign income. The standard tax rate (for residents) in Ukraine is 15%. This rate usually applies to employment income, rental income, investment income, in the event of inheritance by any heir from a non-resident testator, income from the sale of an object of movable property. Non-residents receiving income originating from the territory of Ukraine. Tax rate for income received by non-residents as interest, royalties, dividends and salary paid by a Ukrainian employer is 15 %. Tax rate for income from bank deposit rates is 5 %. And tax rate for any other form of income gained from sources in Ukraine, including salary and directors fees paid by a non-resident employer is 30%. A person is a tax resident in Ukraine if he has a place of residence in Ukraine. If the person has a permanent place of residence in Ukraine and another country, the person is deemed to be resident of Ukraine if his centre of vital interests is in Ukraine, or if he stays in Ukraine at least 183 days during the tax year (calendar year). Property maintenance costs in Ukraine are generally very low. Utilities usually amount to $30-50 per month for an average apartment, and there are no property taxes (other than the tax paid when selling real estate and taxes on income).

7. Back to EU Member states Legal entities Ukrainian entities and foreign entities doing business in Ukraine through a permanent establishment are liable for corporate profit tax. The Corporate Tax Law provides for the taxation of the following persons: Legal entities organized under the laws of Ukraine and which carry out business in Ukraine; Foreign entities which get a profit from sources in Ukraine (the profit arises from activities performed or property located in Ukraine, in case of dividends, interest, royalties and other passive income, the income is paid by a resident of Ukraine) Non-resident legal entities which carry out business activities on the territory of Ukraine through a permanent establishment; The corporate Tax Law established a basic corporate tax rate of 25 %. This is a standard rate from the clean income (i.e. gross income) for the entities and natural persons - private entrepreneurs. However, small legal entities may choose the simplified taxation. Thus VAT - registered entities pay 6% of their sales proceeds under the simplified tax system, while non -VAT - registered entities pay 20%.

8. Back to EU Member states 6. Disposal of property Tax rate on income received by a taxpayer from the sale of a house, apartment or room not more than once during a reporting year, if the total surface area of the house, apartment or room does not exceed 100 square meters is 0 % for residents and non-residents. Tax rate on income received by a taxpayer from the first sale of a house, apartment or room not more than once, during a reporting year if the total area of the object exceeds 100 square meters. The subject to taxation is the part of income proportional to the amount of exceeds is 1 % for residents and 30 % for non-residents. Tax rate on income from the sale of more than one object of real estate property during a calendar year is 5 % for residents and 30 % for non- residents.

9. Back to EU Member states 7. Non resident owners of property After purchasing real estate property in Ukraine by non-residents, there might be several complications related to using this property in course of economic activity of the business enterprise (or the owner of the property who does not hold Ukrainian citizenship) (for example in case of property being rented to a third party). The options for non-residents owning real estate property in Ukraine are listed below: The owner of the real estate property may sign a contract directly with maintenance enterprise, which will be responsible for keeping property in operating conditions. A separate contract should be signed in case of property being rented. In case of non-resident is being represented by a separate entity, which is in charge of renting the real estate, registration in accordance with current Ukrainian legislation is in order. A real estate management contract may be signed with a resident of Ukraine, who will be in charge of the property.

10. Back to EU Member states The most viable and effective option from economic standpoint is signing a real estate management contract. (option № 3) Option №1 has several drawbacks. Non-resident will lose a lot of time and resources on legal registration of the contracts, control over payments and other similar operations. It might be difficult for a non-resident to effectively and efficiently manage the real estate property located in the Ukraine being at distance. The second option is associated with additional costs for non-resident related primarily to staff wages, office maintenance and other costs associated with an activity of individual enterprise which is renting the property or the non-resident’s representation party. Only the 3 rd option guarantees time and cost efficiency, and will help to avoid additional problems related to doing business in the Ukraine.

11. Back to EU Member states 8. Sundry issues The buyer should verify the seller’s title by reviewing the title documents. Title documents should include: a certificate of privatization, or purchase contract (usually notarized), or evidence of inheritance or gift; a certificate from the Bureau of Technical Inventory (BTI) stating that the seller is the owner and citing the BTI registration number; and a certificate from the Unified Register of Prohibitions on Disposal of Immovable property showing the absence of mortgages, arrest or other encumbrances. The passport of both parties is also important. The notary also requires that the state duty and pension fund fee have been paid. After the purchase contract is executed before a notary, the buyer should then apply for the transfer of the property to be registered at the appropriate BTI office. Transfer only becomes effective when sale purchase documents are registered.

12. Back to EU Member states Ukrainian law makes a distinction between the title to land and the title to the buildings, constructions and other items located on the land. These rights are granted and exist separately. Therefore, an owner of a building does not always have the right of ownership to the land underneath. It is a very common situation in Ukraine when the ownership of the building differs from the ownership of the underlying land. The purchase of a building does not automatically result in the acquisition of the title to the land on which it stands. Foreign individuals, foreign legal entities and joint ventures established by Ukrainian and foreign persons are not allowed to own agricultural land.

13. Back to EU Member states