Taxes when buying an apartment

For many Ukrainians, buying their own apartment is almost the goal of their whole life. But here’s the paradox: as soon as the opportunity to become the owner of residential real estate appears, the joy immediately disappears. Current information about taxes on the purchase of an apartment on 2023 year link.

This is because our compatriots consider buying an apartment only from the financial side, completely forgetting about the legislative side. And the laws of Ukraine provide for the payment of tax when buying an apartment in the amount of 1% of the cost of the apartment. Those. if, for example, you buy an apartment for $20, you will have to pay another $200 to the Pension Fund. “Very little” - you might think, but, unfortunately, there are simply no such housing prices in Ukraine. By the way, if you decide quickly buy an apartment in Kyiv, we recommend contacting the best luxury real estate agency THE Capital. 

Over the past year, real estate prices in the largest Ukrainian cities have grown by 4-18% in hryvnia and up to 12% in dollar terms. In Kyiv, you can buy housing for $720 per sq. m. Apartment prices will increase by 2021-15% during 25 and will continue to grow in the future. Therefore, additional expenses in the form of tax deductions when buying an apartment do not inspire joy. Nevertheless, it is necessary to understand this issue, since there is no way to avoid paying taxes and fees. No notary will register a sale and purchase transaction without a document that confirms their payment.

Real estate seller expenses: what taxes will you have to pay when buying an apartment?

If you decide to sell an apartment, you should calculate in advance all possible associated costs when concluding the transaction. And they, I must say, "on the little things" runs up decently. When selling real estate, the seller pays three taxes:

• state duty in the amount of 1%;
• income tax 5% for residents and 18% for citizens of other countries;
• military fee - 1,5%

Read more:: Power of attorney for the sale of the apartment.

Considering that the transaction amount is not small, and taxes on the sale and purchase of an apartment are paid as a percentage of the transaction amount, the property owner should be ready to shell out certain funds from his pocket. It will not work to reduce the amount of tax and avoid mandatory payment, since the notary will refuse to certify the contract. 

What affects the tax rate when buying an apartment?

The tax burden falls not only on the buyer, but also on the seller. Therefore, do not rush to count the money for the sale of an apartment - the proceeds from the transaction will be reduced due to taxes. A number of factors can affect the amount of deductions when making transactions for the sale and purchase of real estate:

• the number of transactions of purchase and sale of residential real estate in a year (tax is paid for each next sale in the reporting year);
• how long has the seller been the owner of the apartment being sold (if less than 3 years - additional costs are provided).

If you are a seller and you are selling residential property for the first time, you are exempt from paying taxes. But in case of resale, get ready to deduct an additional 5% of the value of the object. We assure you that it is unlikely that you will be able to avoid paying or reduce costs in any way. When it comes to taxes, public services will not be too lazy to check everything once again. In turn, sellers are trying to be cunning in order to at least reduce the amount of additional costs.

Read more:: Taxes when buying an apartment.

For example, they indicate in the contract of sale the lower cost of the apartment. But the focus, as a rule, does not pass. You will have to explain why you are selling so cheaply (if the difference between the price indicated in the contract and the market price is above 33%). Moreover, experts analyze the situation on the real estate market, check the minimum cost of selling an apartment and compare it with yours, and as a result, demand to pay the tax in full.

What taxes do buyers pay when buying an apartment?

When planning to buy an apartment, you need to understand that financial costs will not be limited only to the cost of living space, while many other expenses will have to be paid. 

When buying an apartment, be prepared to pay the following taxes:

• 1% of the value of real estate to the Pension Fund of Ukraine;
• 1% state duty;
• expenses for registering property in the state register of real rights to real estate.

It is worth knowing that the amount of tax when buying an apartment differs in each of the regions of Ukraine, as it is regulated by local authorities.

Categories of Ukrainian citizens exempted from paying tax to the pension fund when buying an apartment

There are exceptions to any rule, including in paying taxes when buying an apartment. The legislation provides for benefits in the sale and purchase of real estate for certain categories of citizens.

1. Veterans of the Great Patriotic War
2. Families of the military, missing
3. Citizens with disabilities of 1-2 groups
4. Participant in the liquidation of the accident at the Chernobyl nuclear power plant. 

The second party to the transaction for the sale and purchase of real estate is not exempt from payment of tax to the pension fund when buying an apartment. Unless it also belongs to the categories listed above. But it is worth noting that if you are purchasing residential real estate for the first time, you do not have to pay a mandatory payment of 1% of the transaction amount to the Pension Fund. But there is a nuance - you are not completely exempt from payment, but you are entitled to a pension tax refund when buying an apartment. That is, the scheme is as follows - you pay tax, and then you can demand it back after the completion of the transaction. But for this you need to go through lengthy bureaucratic procedures and even court proceedings. Why is that? The fact is that in Ukraine there is no single database that would provide an opportunity to check information whether a person is actually buying a home for the first time. The notary will not take your word for it and will refuse to certify the relevant sales contract.

Pension tax refund when buying an apartment

Needless to say, due to the constantly growing property prices, the average Ukrainian can afford to buy an apartment once in a lifetime. In itself, the registration of a sale and purchase transaction is not an easy task. And hardly anyone wants to deal with the procedure for the retirement tax refund when buying an apartment. A lot of things to do without it. However, if this is a matter of principle for you, then get ready to go through the following steps:

1. Submission of an application to the Pension Fund for reimbursement of the fee. In the application, you need to describe the operation of buying a home, confirm the fact of payment of the pension fee, add an information certificate from the State Register of Real Rights to Real Estate, which confirms that the acquired housing is the first real estate of the specified category that is acquired by the person. As practice shows, within 25-35 calendar days you will receive an answer with a refusal to refund. 
2. In case of refusal, real estate buyers can file a claim in the administrative court. At this stage, we advise you to contact lawyers who will help in drawing up the Statement of Claim. The plaintiff is obliged to pay a court fee, which is refunded only if the claim is satisfied.
3. After a positive decision, a mechanism for collecting debt from the Pension Fund was launched.

Judging by the above, the return of pension tax when buying an apartment seems like an impossible task. It is up to you to decide whether it is worth spending time, nerves and money on it. Subscribe to our updates real estate blog and get the latest publications from the real estate agency THE Capital.