End of “shadow” rentals: Verkhovna Rada proposes new approach to housing taxation

The Verkhovna Rada of Ukraine has registered draft law No. 15031, which provides for a change in the approach to taxation of individuals’ income from renting out residential property. The document aims to legalize the rental market, reduce the tax burden on property owners, and increase the level of legal protection for tenants.

According to the explanatory note, the current taxation model—18% personal income tax and 5% military tax—actually encourages a significant number of landlords to operate outside the legal framework. As a result, a significant number of contracts are concluded unofficially, which deprives tenants of proper guarantees and the budget of stable revenues.

The draft proposes to reduce the personal income tax rate for rental income to 5% and to introduce temporary tax breaks for the period of martial law. In particular, it is envisaged that from April 1, 2026, until the end of the year in which martial law is lifted, income from the rental of residential property may not be included in the total taxable income of an individual. The tax payment mechanism is defined separately — landlords must independently declare their income and pay tax liabilities on a quarterly basis.

The authors of the bill justify the need for change by citing the scale of the “shadow” segment. According to estimates, millions of apartments are rented out without official registration, while the level of voluntary declaration of rental income remains low. Against this backdrop, the issue of legalizing the market is becoming particularly relevant given the growth in internal migration and demand for rental housing.

It is expected that reducing the tax burden will encourage property owners to switch to official contracts, which will contribute to increasing market transparency and reducing the number of conflicts between parties to rental relationships. At the same time, lawyers point out that the effectiveness of the innovations will depend on control mechanisms and the subsequent practice of applying the rules after their possible adoption.

The bill is currently under consideration, and its final version may be amended based on the results of parliamentary discussions.