In Ukraine, over 90% of approximately 1.5 million rental agreements are made unofficially. This situation leads to significant losses in tax revenues for the state budget and hinders the implementation of housing reform. Legislators propose to address this issue by reducing the tax burden on landlords and introducing a fixed rate that will encourage the legalization of the market.
This is reported by Finway
Taxation Issues and Risks of Excessive State Regulation
Chairwoman of the Parliamentary Committee on State Governance, Olena Shulyak, emphasized that a deep legislative modernization is needed to create a transparent and secure rental market. The main obstacle to the legalization of landlords’ incomes remains the excessive tax burden, which currently stands at 23% (18% personal income tax, 1.5% military tax, and other deductions). Under these conditions, most property owners prefer shadow schemes.
“There should be a simple and clear rate. Previously, there was talk of 5%, although this is unlikely. But at least 5% plus military tax – then we would have something to discuss,” Shulyak noted.
To illustrate the danger of excessive state intervention, Shulyak cited the example of Argentina. There, strict regulations led to a housing shortage, skyrocketing prices, and market paralysis. Specifically, a minimum contract term of 3 years was established, along with price fixing and a ban on transactions in foreign currency. As a result, the number of available apartments in the capital halved, and prices rose to the point where staying in hotels became more cost-effective. Only after these restrictions were lifted did the situation begin to stabilize.
Directions of Housing Reform and New Legislative Initiatives
Within the framework of housing reform in Ukraine, a number of key directions have already been developed, including:
- the adoption of draft law No. 12377, which provides for the protection of the rights of both tenants and landlords;
- the creation of a legal framework for the development of social housing;
- the formation of a modern model for managing the housing stock;
- the implementation of fair taxation for rental activities;
- taxation of digital platforms such as Booking and Airbnb, which currently do not comply with Ukrainian tax norms.
According to Olena Shulyak, these measures are intended to ensure market openness and protect the interests of all participants, as well as stimulate the legalization of rental relationships in the housing real estate sector.