All questions

Foreign investment

Overseas investors may acquire ownership rights to non-agricultural land plots within settlements, as well as non-agricultural land plots outside settlements underlying the real estate objects privately owned by them.

Agricultural lands in Ukraine may belong to foreigners only on the right of lease. Foreigners and foreign legal entities are prohibited to acquire agricultural land in Ukraine. In the event of inheritance of agricultural lands by a foreigner, the foreigner is obliged to dispose of the ownership right to the agricultural land within one year.

The land that is designated for individual or collective gardening may belong to foreigners only on the right of lease.

There are no restrictions that apply to the lease of the land plots, or the ownership or lease of buildings and facilities by foreigners and foreign legal entities.

Structuring the investment

An investment can be structured in a variety of ways, which usually involves either establishing or acquiring a company in Ukraine. While the direct ownership of real estate by foreign individuals is not forbidden, it tends to be less favourable with respect to taxation of proceeds from that real estate or its operation. Limited liability company is the most universal and popular choice of legal form for a company. Some investors who command considerable investments may incorporate an investment venture fund, which is subject to securities market regulations and which profits are generally excluded from corporate profit taxation.

When acquiring existing real estate, traditional options are available of either purchasing the real estate directly from the existing owner or by acquiring shares in its holding company.

The most common way to acquire the real estate directly from the owner is executing the sale and purchase agreement. According to Ukrainian legislation, the sale and purchase agreement of real estate shall be concluded in writing and notarised. For sale and purchase, the valuation of real estate by a certified professional appraiser is performed for determination of the market value of real estate and the correct calculation of the stamp duty amount. It is mandatory for purchasing from individuals. It is optional if the parties are legal entities, but it is still often ordered in practice. The appraiser registers its report in the special database where the tax authorities have access and may compare the prices for similar property.

Instead of purchasing the real estate directly from a company, the shares in this company can be acquired. This usually involves some presale preparation of the company to remove the assets and relocate activities, in which the purchaser is not interested. The company may carry some risks associated with its former activities. In any case, a legal due diligence is recommended for assessment of legal risks whether the company or the real estate is being acquired.

The Law of Ukraine on Investment Activity contains provisions intended to restrict investment mechanisms in residential construction to prevent shifting entrepreneurial risks of construction projects onto the consumers. Investment and financing of residential construction, with the use of private funds attracted from individuals and legal entities, may be carried out exclusively through construction financing funds, real estate operation funds, mutual investment institutions, as well as by issuing special purpose corporate bonds, the fulfilment of obligations under which is carried out by transferring the target property or the part of the target property of residential construction.

Investment in property rights to real estate is also a common market option to structure acquisition of real estate under construction. When acquired from the developer, the investor receives the rights to register ownership title to the real estate once it is commissioned into operation. At the moment, this right is not registered, which may lead to collisions in practice.