Purchase of real property and transfer taxes
Acquisition of land/property can be made in form of an asset deal or a share deal. In the first option, property is acquired directly from the owner, and the deal should be notarized to be effective. In the second option, the buyer acquires the legal entity owning the property, together with any other assets and obligations.
In both cases it is advisable for the buyer to carry out due diligence analysis prior to entering into an agreement. It should reveal whether the property to be acquired (or the owner entity) is free from encumbrances or any other legal risks.
When property is acquired directly (asset deal), the transfer of the legal title should be registered in the State Register of Proprietary Rights for Immovable Property. The title transfer and registration of title is accomplished by a notary immediately after the notarization of the purchase agreement.
Applicable transfer taxes and charges:
|Pension fund duty||–||1%||Buyer|
|VAT||–||20%||Buyer||if sold by a legal entity|
|Corporate profit tax/Income tax||0%-20%||0%-20%||Seller||varying amount depending on the Seller meeting certain criteria|
|Military duty||1,5%||1,5%||Seller||if sold by a natural person|
|State duty/Notary fees||at least 1%||at least 1%||Buyer/Seller||private notaries may charge slightly over 1%|
|Registration fee||200 – 9000 UAH||200 – 9000 UAH||Buyer||depending on the registration term, from 2 hrs. to 5 days|
|Real estate agency charge||2,55%-5%||2,55%-5%||Buyer||if applicable|
Notary fees are normally divided between the seller and buyer, although the parties may agree otherwise.
Real property taxes
Legal entities and individuals are subject to real property taxes in respect of assets owned by them. Being municipal taxes and levied by local authorities, these are as follows:
- Land tax
- Immovable property tax
Land tax is assessed annually for the subsequent year and is paid on a monthly basis. The tax rate is a percentage of the “normative land value” in each municipality. In Lviv, the rate of tax for non-agricultural land is set at 1% of the normative land value of a particular land plot, which can be ascertained electronically by obtaining an excerpt from the cadaster plan.
Immovable property tax is applicable to residential and commercial property other than land. The tax rate for the commercial property in Lviv varies between 0,75%-1,25% of the minimum salary, effective on January 1 of the tax year, per sq.m. of the property area. As of 2018, that makes roughly 30-50 UAH per sq.m. of the premises.
Should the owner of the premises decide to rent it to other persons, the rental income from real estate will be included to the overall taxable income at the standard corporate profit tax rate, which is currently 18%.