Rental Income Tax in Ukraine: Individual or Sole Proprietor, How Much and How to Report

Renting out an apartment generates income that must be taxed. Many owners operate "in the shadows" for years, but the risks of doing so are growing: the tax authority receives data from banks, contracts and listings, and tenants increasingly ask for an official lease to claim subsidies or register their residence. This article explains how to pay rental income tax legally, how much each model costs and which one to choose.

The rules for taxing individuals' rental income are set by Article 170 of the Tax Code of Ukraine, and for entrepreneurs by Chapter 1 of Section XIV of the Tax Code on the simplified tax system.

Option 1. You're an Individual and So Is the Tenant

This is the most common situation. It works like this:

• personal income tax (PIT) — 18% of the rent;
• military levy — 5% (raised from 1.5% to 5% from 1 December 2024 by Law No. 4015-IX).

That's 23% of income in total.

How to Pay

The owner pays the tax personally. It's paid quarterly within 40 calendar days after the end of each quarter. After the year ends, you file an annual income and property tax return by 1 May of the following year, showing all income received and the amounts already paid.

Minimum Tax Base

The Tax Code provides that the tax base can't be lower than the minimum rental payment determined under a methodology approved by local governments. So even if the lease states a token amount, tax will be calculated on at least this minimum. Check the minimum payment in your community.

Option 2. The Tenant Is a Company or Sole Proprietor

If you rent to a legal entity (for example, to house its employees) or to an entrepreneur, the tenant acts as a tax agent. It withholds 18% PIT and 5% military levy from each payment and transfers them to the budget. You receive the amount net of taxes and usually don't need to file a return for this income. It's important to state clearly in the lease whether the rent amount is before or after tax.

Option 3. You're a Sole Proprietor on the Single Tax

Many owners register as individual entrepreneurs (FOP) because it's cheaper with significant income.

Group 3

• Single tax — 5% of income (for non-VAT payers);
• military levy for Group 3 — 1% of income (introduced from 2025);
• unified social contribution (ESV) — at least 22% of the minimum wage monthly. ESV builds your pension record. The rules for entrepreneurs' ESV during martial law have changed, so check current requirements.

Reporting — a quarterly single tax return.

Group 2

Group 2 involves a fixed monthly payment and allows services to individuals and single-tax payers. It may also suit renting housing to individuals, but has limits on income and number of employees.

Simplified System Restrictions

The Tax Code sets restrictions for staying on the simplified system, including on the area of housing rented out. If you rent out several large apartments, check whether you fall under the restrictions or consult an accountant.

Worked Examples

Take rent of UAH 15,000 a month, i.e. UAH 180,000 a year. For simplicity, assume a minimum wage of UAH 8,000 (the actual figure is set by the state budget law).

Individual

• PIT: 180,000 × 18% = UAH 32,400.
• Military levy: 180,000 × 5% = UAH 9,000.
• Total: UAH 41,400 a year.

Group 3 Sole Proprietor

• Single tax: 180,000 × 5% = UAH 9,000.
• Military levy: 180,000 × 1% = UAH 1,800.
• ESV: 8,000 × 22% × 12 = UAH 21,120.
• Total: UAH 31,920 a year.

Higher Rent

At UAH 30,000 a month (UAH 360,000 a year):

• as an individual — UAH 82,800;
• as a Group 3 sole proprietor — 18,000 + 3,600 + 21,120 = UAH 42,720.

The higher the income, the more advantageous the sole proprietor route, since ESV is fixed. With low rent the difference is small, and running a sole proprietorship (reporting, account, bookkeeping) takes time. If you're already a sole proprietor for another activity, adding rental may be the simplest — check that you have the right activity code and won't exceed your group's income limit.

How to Register as a Sole Proprietor for Renting: Step by Step

1. Apply for state registration as a FOP online via Diia or at an administrative services center. Registration is free and takes from a few hours to a few days.
2. Choose an activity code (KVED) — for renting housing, 68.20 "Renting and operating of own or leased real estate" is most often used.
3. Apply for the simplified system and choose a group — together with registration or within the set period afterwards.
4. Open a sole proprietor account at a bank and receive payments only to it.
5. Keep an income ledger — for Group 3 this can be done in the electronic taxpayer account.
6. Pay the single tax, military levy and ESV on time and file returns.
7. Sign leases as a sole proprietor — state your entrepreneur status in the lease.

If you later stop renting, you can close the sole proprietorship, but first file final reports and pay all liabilities.

Renting to Foreigners and Receiving Rent From Abroad

If your tenant is a foreigner, the rules for you as a Ukrainian resident don't change: you pay tax on income received. If you live abroad and have become a tax resident of another country, income from property in Ukraine is still taxed in Ukraine, and whether you can credit the tax paid is determined by the double tax treaty. In this situation, consult tax advisers in both countries.

Daily Rentals and Tourist Tax

If you rent out an apartment by the day, besides income tax you may have obligations regarding tourist tax (Article 268 of the Tax Code). Its rate is set by the local council. For daily rentals, simplified system rules and activity codes also matter. Intensive daily renting is essentially a business, so it makes sense to do it as a sole proprietor.

What Happens If You Don't Pay

• Fines for not filing a return and understating tax liabilities.
• Penalties for each day of late payment.
• Additional tax assessments for past periods following an audit.
• Risks in disputes with tenants. Without an official lease and tax history, it's harder to protect your rights in court.

The tax authority can learn about a rental from various sources: neighbor complaints, listings, bank transfers, a tenant applying for a subsidy or residence registration.

Can Expenses Be Deducted?

An individual pays PIT on the full rent — renovation costs, utilities or property tax don't reduce the base. A sole proprietor on the single tax also pays on income, not profit. So optimize spending on renovation for rental from a yield perspective, not a tax one.

How to Do Everything Properly: A Checklist

1. Sign a written lease with a clearly stated rent. See apartment lease agreement.
2. Receive rent to a bank account — it simplifies accounting.
3. Choose your model: individual or sole proprietor.
4. Pay tax quarterly (individual) or the single tax and ESV (sole proprietor).
5. File the annual (individual) or quarterly (sole proprietor) return.
6. Keep leases, reports and payment documents for at least three years.
7. Review your tax model every year: if rent has risen, switching to a sole proprietorship may become more advantageous.

Filing returns and paying taxes is easiest through the electronic taxpayer account on the State Tax Service website, which also has clarifications and templates.

How Taxes Affect Yield

Owners often calculate yield from "gross" rent. But taxes change the picture significantly: at 23%, an apartment "earning 8% a year" actually yields about 6%. Compare that figure with risk-free instruments, as we did in real estate investment. And don't forget property tax if the area exceeds the exemption.

Frequently Asked Questions

Do I pay tax if relatives live in my apartment for free? If no rent is received, there's no income. But it's wise to sign a written loan-for-use agreement to avoid questions.

Who pays tax if the apartment is co-owned? Each co-owner declares their portion of income in proportion to their share, or by agreement if one of them receives the income.

Can I pay the tax for the whole year at once? The law requires quarterly payment for individuals. Skipping quarterly payments may lead to penalties.

Is the security deposit taxable? A deposit returned to the tenant isn't income. If you keep part of it as compensation or payment, that amount may be treated as income.

What if the tenant doesn't pay? Tax is paid on income actually received, but the minimum base may apply regardless of the rent. Resolve the issue with the tenant under the lease and, for systematic non-payment, through the courts.

Do utilities paid by the tenant count as my income? If the tenant pays utility bills directly to suppliers or reimburses you exactly according to meter readings, this is generally treated as compensation of costs rather than rent. To avoid questions, state in the lease that utilities are paid separately from rent and keep the receipts.

Is it worth registering as a sole proprietor for one apartment? With modest rent the savings may barely cover the time and cost of bookkeeping. Run the numbers using the examples above: the higher the rent, the stronger the case for the single tax.

Conclusion

An official rental means 23% tax for an individual or much less for a sole proprietor with moderate income. The choice depends on the rent amount and your willingness to keep records. The main thing is not to stay in the shadows: it protects you in disputes with tenants and from fines. If you're just preparing to rent out an apartment, start with our guide how to rent out your apartment.

Sources

• Tax Code of Ukraine — Article 170 (rental income), Article 268 (tourist tax), Chapter 1 of Section XIV (simplified system).
• Law No. 4015-IX raising the military levy.
• State Tax Service of Ukraine — electronic account, clarifications, tax return forms.
• Civil Code of Ukraine — Chapter 59 "Lease (Hire) of Housing".

Read Also

• How to rent out your apartment
• Apartment lease agreement
• Property tax in Ukraine
• Real estate investment in Ukraine