Heirs of the inheritor may lose almost a quarter of the inheritance if the father is abroad: when you will have to pay 23%

The process of transferring property rights by inheritance in Ukraine is traditionally associated with minimal tax burden for close relatives. However, modern realities related to mass migration and prolonged stays of citizens abroad have raised the issue of tax residency.

Today, a person's legal affiliation to a certain country (citizenship) does not always coincide with their status as a taxpayer. This creates serious legal and financial pitfalls for Ukrainians.

Although first-degree relatives (children, parents, spouses) are usually exempt from inheritance taxation, losing the status of a tax resident of Ukraine completely changes the rules. So how does the residency determination mechanism work and which documents are decisive for applying preferential tax rates.

Resident status

Determining residency status is the basis for establishing the taxation procedure. According to the Tax Code of Ukraine (TCU), the concept of "resident" is not identical to the concept of "citizen." The law establishes a clear algorithm for determining this status:

Place of residence: A resident is a person who has a place of residence in Ukraine. The place of residence is housing where the person permanently or temporarily resides (Art. 29 of the Civil Code of Ukraine).

Permanent place of residence: If a person has housing in another country as well, they are considered a resident of Ukraine if they have a permanent place of residence here. This is a place where the person lives for at least one year and does not intend to limit such residence for a specific purpose.

Center of vital interests: If the permanent place of residence is in both countries, preference is given to the one where the person has closer personal or economic ties. A sufficient condition for determining the center of interests in Ukraine is the residence of family members here or registration of the individual as an entrepreneur.

The 183-day rule: If it is impossible to determine the center of interests, a resident is considered a person who stays in Ukraine for at least 183 days during the tax year.

Citizenship as the last argument: Only if none of the previous criteria work, residency is determined by Ukrainian citizenship.

The State Tax Service reviewed the case of an applicant whose father died in the Russian Federation, with a foreign death certificate indicating another citizenship, but who retained a Ukrainian passport and registration at a place of residence in Ukraine.

The significance of Ukrainian documents

Despite the data in the foreign death certificate indicating another citizenship, the deceased's possession of a Ukrainian citizen's passport is official confirmation of their Ukrainian citizenship. Moreover, when performing notarial actions, namely opening an inheritance case, the identity of participants is established based on the Ukrainian passport or other national documents.

The applicant stated that her father had a taxpayer identification number and Ukrainian documents confirming permanent residence. This gives the right to independently determine the testator as a resident of Ukraine based on passport data and registration.

Inheritance from parents may cost 23% of its value: when taxes must be paid

In Ukraine, the inheritance taxation procedure depends not only on the degree of kinship but also on the tax status of the testator and the heir. In some cases, the difference can be 23% of the value of the inherited property.

If both the testator and the heir are residents of Ukraine, and the inheritance passes between first-degree relatives — parents, children, or spouses — a zero personal income tax rate applies. In this case, no military tax is also paid.

However, the situation changes drastically if at least one party is a non-resident of Ukraine. In this case, regardless of the degree of kinship, the inheritance is taxed at a rate of 18% personal income tax and 5% military tax.

Thus, when inheriting an apartment, house, or land plot from a father or mother, confirming tax residency can be decisive. In fact, it determines whether the heir will have to pay taxes amounting to 23% of the total value of the inherited property.

The role of the notary and independent status determination

Regulatory authorities note that they do not determine a person's residency status on their own initiative. The taxpayer, in this case the heir, independently determines this status as regulated under the Tax Code of Ukraine.

The notary, in turn, has the right to request all necessary documents (passports, registration certificates, registry information) to confirm circumstances affecting taxation.

Thus, the presence of the deceased's Ukrainian passport and a certificate of their registration in Ukraine are sufficient grounds for the notary to apply a zero tax rate, despite the data in the foreign death certificate.

In conclusion, the zero rate is achievable even in complex cross-border cases if it is legally proven that Ukraine remained the center of vital interests of the deceased, and their stay abroad was temporary.

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