February 2013

New taxation rules with respect to real property tax

We would like to remind you kindly that starting 1 January 2013 Article 265 of the Tax Code of Ukraine (the “Code”) came into effect with respect to the real property tax dealing with real estate property that is not land plots. Taxpayers shall be legal entities and individuals, including non-residents in Ukraine, being the owners of residentialproperties. The residential properties shall be:

а) A residential building – a capital structure constructed in compliance with the requirements set forth by law, other regulatory acts, and designated for permanent residence. The residential buildings shall be residential small-holding buildings and residential apartment buildings having various number offloors;

b) A residential smallholding building is a residential building located on a separate land plot and consisting of residential andnon-residential premises;

c) An extension to a residential building is a portion of building located outside of the limits of its main outer walls and having one (or more) joint main wall(s) with the major portion of thebuilding;

d) An apartment is separate premises in a residential buildingdesignated and available for permanent residence;

e) A cottage is a building having one or 1.5 floors and a small residential area used for permanent or temporary residence andhaving a household land plot;

f) Rooms in multi-family (communal) apartments are separatepremises in the apartment where two or more tenants reside;

g) A garden building is a building used in summer (particular season) which in terms of the requirements to the covered area, external structures and engineering equipment does not complywith the standards set for residential buildings;

h) A dacha building is a residential building to be used throughoutthe year for countryside leisure.

Based on the definition of the “residential properties,” the list of properties subject to payment of tax does not include industrial and commercial properties (falling within the non-residential properties) andhotels.

Pursuant to Article 265.2.2 the tax is not paid for:
 Residential properties owned by state or territorial communities (their joint ownership);
 Residential properties located in exclusion areas and unconditional (mandatory) resettlement as set forth by law;
 Structures of a family type orphanage;
 Garden or dacha buildings (but their number should not exceed one such property per taxpayer);
 Residential properties owned by families having many children and foster families having three or more children, but their number should not exceed one such property per family;
 Dormitories.

Amount of the tax

Assessment base is the residential area of a residential real estateproperty.

The residential real estate property is subject to payment of tax at a tax rate set by the relevant village, settlement or town/city councils. For the residential apartments where the area thereof does not exceed 240 square meters, and the residential buildings of over 500 square meters,the real estate tax rate for the property not being a land plot must not exceed 1% of the minimum wage set as of 1 anuary of the accountingyear. In case of an excess of the amounts of size of the aboveresidential area the tax rate shall be 2.7%.

The Tax Service of Ukraine located in the region of the real estate property shall calculate the amount of real estate tax for the properties not being land plots.

Payment of the tax

Before 1 July of the accounting year, bodies within the State Tax Administration of Ukraine must deliver to the individual taxpayers a tax notice with the decision on the amount of the real estate tax. Should any question arise with respect to the amount of tax, the taxpayers are entitled to come to the Tax Administration of Ukraine to reconcile the data and settle the issues in dispute.

Real estate tax payers who are legal entities must independently calculate the amount of tax as of 1 January of the accounting year and by February of the same year deliver a return in the approved form to their body of the Tax Administration.

The period for payment of the real estate tax

According to the notice-decision the tax is to be paid as follows:
 Individuals shall pay within 60 days after delivery of the tax notice-decision;
 Legal entities shall pay in advance installments each quarter by the 30th date occurring after the accounting quarter, such installment shall be entered into the annual tax return.