There are no any restrictions for real estate purchase by foreigners (except for state or municipal freehold). But, usually, after getting a lot of real estate foreigner is willing to do something with that property. For example, most natural is to grant for a lease. In such cases, foreigner should know about some of the nuances of granting to lease in Ukraine.
According to Art. 170.1.3 of the Tax Code of Ukraine property owned by a natural person – non-resident (means foreigner) could be granted to a lease exclusively through physical person – entrepreneur or legal entity – resident (authorized persons) that perform representative functions such non-resident based on a written contract and act as its fiscal agent in respect such income. Non-resident who violates this paragraph is deemed to have evaded the payment of tax.
In other words, the foreigner can not directly lease real estate in Ukraine. Foreigner in Ukraine needs a mediator – a legal entity or private entrepreneur, who pay a foreigner taxes received for rent. With such intermediary to conclude an agreement on the implementation of representative functions (or contract representation). It is clear that the representative (intermediary) under such contract may provide representation both paid and free.
Representative functions should be understood as representation that according to Art. 237 of the Civil Code is a relationship in which one party (the agent) required or permitted to do a transaction on behalf of the other party, which she represents.
You should also pay attention to the obligation to comply with the written form of agreement on representation.
Art. 238 of the Civil Code established that the representative can not perform any transaction on behalf of the people he represents, in their own interests or in the interests of another person, whose representative he is also, except for commercial representation, as well as other persons prescribed by law. According to Art. 243 of the Code commercial representative is a person who constantly and independently, representative entrepreneurs for conclusion of agreements in the field of entrepreneurship.
Therefore, the contract representative must be in writing. We recommend to apply for such a development contract to lawyers.
Tax nuances of nonresident real estate for rent
Article 168 of the Tax Code of Ukraine (hereinafter – TCU) stipulates that tax agent who has (pay, afford) taxable income in favor of the taxpayer is required to maintain the amount of tax on such income at the expense of using the tax rate specified in this Code st.167 ( 15%, and in the event that the total amount received by the taxpayer in the reporting month tax revenues tenfold higher than the minimum wage prescribed by law as of January 1 of the tax year, the tax rate is 17% of the excess).
Tax paid (transferred) to the budget while paying only taxable income payments. Banks accept vouchers for payment of income only if it is accompanied by payment document for the transfer of this tax to the budget (pp. 168.1.2 p.168.1 st.168 TCU). If taxable income is accrued tax agent, but not paid (not supplied) to the taxpayer, the tax subject to deduction of such accrued income to be transferred to the budget tax agent within the terms established by this Code for the monthly tax period ((pp . 68.1.5 p.168.1 st.168 TCU ).
You will need to tax the mediation
According pp.170.1.6 § 170.1 st.170 Tax Code of Ukraine entities that conduct brokering activities related to the provision of renting real estate (“realtors” i.e. real estate agencies) must submit information about their Clients through civil legal contracts (agreements) to lease property to the state tax authority at the place of registration within the time prescribed for filing the tax calculation, in the form prescribed by the central authority of the State Tax Service.
According to point “b” of Article 176.2 st.176 TCU persons pursuant to this Code have the status of tax agents are required to submit the terms set forth in this Code for fiscal quarter, the tax calculation amount of income accrued (paid) in favor taxpayers and amounts withheld their taxes to the state tax authority at the place of its location. This calculation is only when calculating the amounts specified income taxpayer tax agent during the reporting period. The introduction of other forms of reporting on these issues is not allowed.
Concerning lease of real estate property by non-residents and legal assistance for foreigners, please, contact our attorneys: