Considering the growth of favorable investment climate in Ukraine, a growing number of foreign citizens consider our country as a territory for fulfillment of beneficial commercial transactions. Laws and tax system become loyal to business, and make investors sure in possibility of obtaining some benefit from commercial operations in our country.
Real estate is one of the most popular types of foreign investment. Low prices and a huge suggestion explain why the real estate sector enjoys such popularity.
It is a matter of common knowledge, owners often buy real estate without aim to use it personally, but to give it to rent. Practice demonstrates this source of income is rather profitable. Thus, a number of legal questions arise.
Ukrainian legislation does not contain any restrictions concerning this issue. Moreover, buying of real estate does not depend on your tax residence status.
But giving it for rent is much difficult. Obtaining profit from rent foresees paying of taxes in Ukraine. And foreign individual cannot give real estate to rent directly and personally.
The Tax Code of Ukraine (Art.170) says that a citizen of a foreign country who is not a tax resident of Ukraine, can provide real estate leasing through intermediaries-residents. In other words, a foreigner can apply to a private entrepreneur or legal entity that they represent him in financial relations with the state.
Their cooperation must be confirmed by a written agreement between the foreigner and Ukrainian tax resident. Resident-representative carries commercial operations on behalf of the foreigner to provide real estate for rent, and pays the state all income taxes, obtained this way.
Obviously, asking resident for such kind of cooperation, the foreigner must take certain measures in order to avoid becoming a victim of fraud, namely:
- know in details about the reputation of the potential partner;
- learn about all the existing risks of such cooperation;
- consult a qualified lawyer concerning terms and drafting of the cooperation agreement;
- think over all possible means of control.
After concluding an agreement partners must notify the tax bodies concerning their cooperation and the fact that the resident will represent the interests of foreigner and will pay all the taxes provided by law on behalf of the foreigner.
Overall, Ukrainian tax legislation is very complicated. One cannot help without exhaustive explanations and consulting taking into account peculiarities of your case. Attorneys at law “Bachynskyy, Kolomiets and partners” is your reliable assistant in any legal matter.