Information on tax discount

CREDIT AGRICOLE hereby informs you on the possibility of tax discount for private individuals who received loans for purchase of residential real estate.

Procedure and grounds of obtaining of tax discount by retail income tax payers is governed by the Tax Code of Ukraine (hereinafter, the TCU).

The tax discount for private individuals other than private entrepreneurs is a documented amount of expenses of a resident tax payer because of purchase of goods (works, services) from resident private individuals or legal entities during the reporting year by which the his/her total annual taxable income received by results of such reporting year in the form of salary can be reduced in the events specified by the TCU (cl. 14.1.170 of the TCU).

Total amount of tax discount accrued to the tax payer in the reporting tax year shall not exceed the amount of official annual salary reduced by the amount of the single mandatory state social insurance duty, insurance payments to the Saving Fund and in the events provided by law – mandatory insurance payments to non-state pension fund payable, according to the law, at expense of the salary of the employee and by the amount of tax social benefit, if available (cl. 166 of the TCU).

In particular, according to cl.166.3.1. of the TCU, the tax discount may include a part of the amount of interest paid by such tax payer for mortgage usage determined according to the article 175 of the TCU and according to the cl. 166.3.8. of the TCU – amounts of expenses of a tax payer for construction (purchase) of affordable property as defined by law, including for repayment of beneficial residential mortgage loan provided for such purpose and interest thereon.

A tax payer (resident only) in entitled for a tax discount by results of the reporting tax year (art. 166 of the TCU).

Documented confirmation of expenses included to tax discount (art. 166 of the TCU):

а) tax discount includes expenses incurred by the tax payer during the reporting tax year confirmed by the respective payment and settlement documents, in particular, receipts, fiscal receipts or sales slips, cash receipts, copies of agreements identifying the seller of goods (works, services) and their seller (recipient). The above documents shall reflect the cost of such goods (works, services) and term of their sale (performance, provision).
b) originals of the above documents are not sent to the state tax authorities but kept by the tax payer through the limitation period set out by the TCU.
If by the end of the tax year following the reporting year the tax payer did not exercise the right for tax discount accrual by results of the reporting tax year, such right is not transferred to the following tax years (art. 166 of the TCU).

The procedure for getting of discount on mortgage loan interest, including determination of the amount of interest paid by the tax payer for usage of residential mortgage loan for the purpose of tax discount accrual is set out in the art. 175 of the TCU.

Taking the above into account, each private individual who received the loan for purchase of property, subject to residing in this property confirmed by the registration mark in the passport document, is entitled for reimbursement of a part of interest paid under the loan agreement for the previous year of loan usage.

For this purpose the private individual shall contact tax inspection at the place of registration and provide the following set of documents:

• Copy of the agreement of purchase and sale of property purchased at expense of loan funds;
• Copy of the loan agreement;
• Copy of the mortgage agreement;
• Copies of receipts on payment of monthly installment (the amount of accrued and paid interest for the month shall be segregated in the receipt); 
• Copy of passport and identification number;
• Income statement.

This list is basic BUT not exhaustive as each tax authority may have additional requirements.  

Apart from the above documents, according to the art. 166 of the TCU, the declaration on financial standing and income.

The form of the declaration on financial standing and income can be received by the private individual in a tax inspection at the place of registration.

 It should also be noted that according to cl. 166.5 of the TCU, state tax administration shall provide explanations of the procedure of confirmation of rights for tax discount and submission of tax declaration free of charge, inter alia, through holding of the respective trainings, workshops, etc., ensure free provision of tax declaration forms concerning this tax, other payments stipulated by this section upon the first request of this tax payer.