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Procedure for Commercial Property Tax Payment in 2015

04.04.2015 Author: Natalia Mysnyk
Source: Ukrainian Retail Association
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The owners of trade centers and malls will have to pay new property tax in 2015. While previously the tax was payable only on residential properties (residential buildings, houses/cottages in garden cooperatives), from now on commercial property will also be subject to the tax.
The only exceptions include non-residential immovable properties used in small architectural forms and markets; industrial buildings, such as production facilities, workshops, industrial enterprises warehouses; buildings and facilities of agricultural producers intended only for agricultural production activities.

What are the things that the owners of trade premises should be aware of? Note that the tax will be payable to the tax authorities in location of the properties, not to the tax authorities where owners are registered (which creates certain complications for non-residents).

The rate per 1 square meter of total area in 2015 shall not exceed 1% of the minimum statutory salary in effect as at 1 January 2015. After 2015, the tax rate shall not exceed 2% of the minimum salary. However, one should take into account that the ultimate amount payable shall be fixed by respective local self governments.

How it will look in reality? During the first month of 2015, almost all regional centers of Ukraine have defined the property tax rates in their budgets.

As such, Kyiv City Council resolved that in 2015 the owners of commercial property will pay tax at the rate of 1% the minimum salary (i.e. UAH 12.18 per 1 square meter).

Most city councils have selected “floating” property tax rates that vary subject to the status of the location (zone) where the property is located.

For example, in Kharkiv, the tax rate is within the range from 0.1% to 1% of the minimum salary subject to the location (zone) of the taxable property. As a rule, the zoning is subject to the distance of the object in question from the central part of the city. For trade premises located in the first zone of Kharkiv (downtown), the tax rate is equal to 1%. Premises with similar area located in the second zone are subject to tax at the rate of 0.8%. Specific tax rates and specific zones are defined in Resolution of Kharkiv City Council No. 1793/15 dated 21 January 2015.

Similar resolution was taken by Lviv City Council: in the first zone (historical center of the city), the tax rate is 1% of the minimum salary, in the second zone (developed in XIІ - early ХХ centuries), the rate is 0.75%, in zone three (modern districts) – 0.5% of the minimum salary.

Probably, the only regional city that has not approved the property tax rate is Zhytomyr. For good reason, Donetsk, Lugansk and Crimea have not yet made resolutions on their property tax rates.

Furthermore, according to the explanations of the State Fiscal Service, if a local self-government fails to fix local property tax rate, then minimum rate of such tax shall be taken as 0 %. This means that taxpayers will not be obliged to pay property tax in locations where the property tax rates have not been prescribed.

Therefore, to ensure correct assessment of your tax, please, scrupulously read resolution of the local council prescribing tax rates and defining property zones.

Suppose that the area of your trade hall in zone 1 of the city of Kharkiv is 200 square meters. This means that you have to pay property tax at the rate of 1% of the minimum salary. As such, we multiply the area by the rate (200 х 12.18 = UAH 2,436) and obtain the amount of the tax for 2015, or UAH 2,436.

Corporate property taxpayers are obliged to independently assess the tax payable as at 1 January 2015 and submit their tax returns to the tax authorities at location of their properties with breakdown of the tax amount into quarterly installments.

If you intend to purchase commercial property in 2015, the formula is quite simple. Corporate taxpayer, within one month after origination of the title, should submit the tax return and pay the tax starting from the month when the title to the property was assumed.
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