Housing rental between a sole proprietor and an individual: who pays taxes and what mandatory payments are provided by law

In Ukraine, the taxation of income from housing rental is regulated by the Tax Code. At the same time, in practice, this market segment traditionally has a high level of shadow economy, and a significant portion of rental agreements are not declared. However, for those legal relations that are officially formalized, the law establishes a clear mechanism for paying taxes and distributing responsibility between the parties.

The question is who exactly should pay the taxes: the tenant or the landlord.

What taxes are paid on income from housing rental

The Ukrainian tax system provides several models for taxing income from housing rental. In different cases, the obligation to pay taxes may fall on either the landlord or the tenant. This primarily depends on who, according to the Tax Code, performs the function of the tax agent.

If housing is rented out by an individual to a legal entity or a sole proprietor, then the tenant (including a sole proprietor) acts as the tax agent. This means that when paying the rent, they withhold taxes (personal income tax and military levy) and remit them to the budget themselves, while the landlord receives the amount after withholding.

Thus, the tenant must pay:

• 18% personal income tax,
• 5% military levy.

If the tenant is a sole proprietor or a legal entity, they act as the tax agent. This means they do not pay tax "for themselves" but withhold it from the landlord's income and remit it to the budget.

For example, if the rent is 10,000 UAH, the personal income tax of 18% equals 1,800 UAH and the military levy of 5% equals 500 UAH, together the taxes amount to 2,300 UAH. As a result, the landlord receives 7,700 UAH.

A different situation arises when the tenant is an ordinary individual who is not registered as an entrepreneur. In this case, the Tax Code does not impose the obligation of a tax agent on the tenant, so they do not withhold or pay taxes on the rent. The obligation to declare income and pay personal income tax and military levy fully rests on the landlord, who does this independently according to subparagraph 170.1.5 of the Tax Code.

If the property owner is registered as a sole proprietor and rents out real estate within their entrepreneurial activity, then they pay taxes themselves as a sole proprietor according to the chosen taxation system (for example, the single tax). In this case, the tenant does not act as a tax agent and does not withhold taxes from the rent.

Are social contributions paid on housing rental

The single social contribution is a separate mandatory payment in the system of compulsory state social insurance, regulated by the Law of Ukraine No. 2464-VI "On the collection and accounting of the single contribution to compulsory state social insurance." Its purpose is to finance the pension system and other types of social insurance.

For sole proprietors, the Single Social Contribution (SSC) has an independent nature and is paid as a mandatory contribution due to the status of the SSC payer. This means that a sole proprietor is obliged to pay the contribution regardless of whether they receive income from housing rental or other activities.

According to the Law of Ukraine "On the State Budget of Ukraine for 2026," the minimum wage is 8,647 UAH.

Considering this, sole proprietors are obliged to pay the single social contribution in an amount not less than the minimum insurance payment, which in 2026 is 1,902.34 UAH per month (22% of 8,647 UAH). The maximum SSC amount is limited to 38,046.80 UAH per month and is calculated as 22% of the maximum assessment base — 172,940 UAH, which corresponds to 20 minimum wages.

At the same time, the legislation provides for certain categories of sole proprietors who may be exempt from paying SSC for themselves. In particular, these are sole proprietors with disabilities receiving pension or social benefits, pensioners by age or length of service, sole proprietors who are simultaneously employees and for whom the employer pays SSC in an amount not less than 22% of the minimum wage, entrepreneurs on the general taxation system without income, as well as mobilized sole proprietors during the period of military service upon confirmation by relevant documents.

Previously, the Judicial and Legal Newspaper drew attention to the practice of resolving disputes regarding the return of deposits when renting housing. In particular, court decisions emphasize that the deposit is not an automatic compensation for any property damage, and its withholding or partial non-return is possible only if the fact of damage, its amount, and causal connection with the tenant's actions are proven.

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