The tax on real estate is remitted till 2009

Long talks on all levels about necessity of issue a law about the tax on real estate are finished by resolution of the Cabinet “About prediction of rates of free budget of Ukraine of the main incomes, expenditures and financing on 2008-2010” ( from 25 September 2006 №1359). In this document the government informs that it is impose the tax on the property for individual persons just from 2009. It is explained by necessity “of conducting the action of inventory property and creating the one register of real estate of citizens, analyses of paying capacity of people and calculation of optimal rate of such tax”. In that case, concrete size of rate could improve during the tax reform and will be predicted upon on the basis of the real opportunities of the budget on the following year. At the same time, the government does not announce the rate by which will be liable for taxes real estate.

For the last year in Verchovna Rada were represented three drafts about tax of real estate. Its seeing of tax liability was offered by State tax administration, deputies from part KPU and SPU. Nevertheless, any of drafts were viewed by Verchovna Rada. To specialists mind, it says about big opposition of forces which are not interested in realization of this law.

Tax administration let defined with establishment of minimal quantity of square feet which will be under tax liability. In this case, rate of the tax on the real estate must be 1% of cost of this property per year. The price is defined by estimation of the authorities of state registration. But if such estimation is not established by state authority then estimate the real estate assigns to the tax inspector at the place of object’s location. However, in a project does not specify by what criteria tax inspectors should estimate the property. Tax suppose to take from real estate which are in the property of citizens: residential houses, flats, country (garden) houses, garages, and other accommodations and constructions, the list of which is defined by the Cabinet. In this draft there is nothing about land. It is interesting that impose tax the real estate not only on the territory of our country but also beyond its territory, if such real estate was bought by Ukrainians. It is new nuance in tax liability, which is not clear how to bring it in life. Indeed, there is such tax in many countries. And how then cope with double tax liability?

The same rate of tax liability – 1% of real estate’s cost – offered to fix deputies from KPU and SPU. In September in Verchovna Rada was registered the project of the law “About tax on real estate of citizens’ property”. It is offered to take tax not only from owners of buildings and constructions but from owners of land as well. Innovation could deal with owners of lots, shares and land users (including renters of the lots of state and community property); owners of buildings and constructions and renters who got buildings and constructions in financial lease. As for tax on houses and flats, it is offered to impose residential buildings by taxes (including build to buildings to the residential houses); flats, garden houses, country houses, garages. Non contributory by taxes is minimum cost of all objects of real estate which is in citizen’s property which is not more than 70 thousands of dollars. This moment is controversial. Under this tax fall 90% of flats in Kiev and about 60% of two-bedroom flats in regions. In this case, it is not evident about land: will be its cost include in the cost of the real estate.

Representing the draft, contractors wrote that acceptance of this document provides the conditions for establishment of social justice and gives an opportunity to provide additional entries in a budget by means of enlargement of tax base: “Existing tax system for now, gives an opportunity to them, who got state property in a future economize it because there is no tax on the property. At that time in all democratic countries the correlation between poor and rich is regulated by usage of flexible system of tax liability. Namely by such tax in many development countries of the world is the tax on property…” This draft is just entry that it is needed the law about “tax for wealth”, what is entered in the point 19 of Generalist national unity.

May be it is better now without tax?

Do we need the tax on real estate? Specialists differ in opinion. Some say that it is necessary for stimulation of development on new construction, repair of damage buildings and constructions, demolishing of nonoperating property and for economic development of country in general. By the way, in resolution of the Cabinet mentioned that tax for real estate is planning to add “with the purpose of unshadowing of incomes of people, providing the social justice and strengthening of its resource base of local budgets.” Other is opposite thinking that real estate and enterprising are too important elements of management, to be yet again experimental field for politicians.

On projection of government in case of imposing the tax on real estate income from it in 2009 will be 471,2 millions of hryvnas or 0,06% GDP, in 2010 – 553 million of hryvnas or 0,06% GDP.