If you own assets in Ukraine (e.g., in Kyiv, Odesa) or expect to inherit property there. It is essential to be aware of the legal and tax consequences associated with the inheritance distribution process.
Ukraine’s inheritance tax rules are complex and can have a significant impact on heirs. A proper understanding of local law—and early planning around wills, residency, and lifetime gifts—can significantly reduce exposure to taxes on intergenerational wealth transfers.
In addition, Ukraine’s inheritance tax planning can prevent legal disputes, delays in estate settlement, and unexpected demands from various authorities.
What’s the Difference Between Estate Tax and Inheritance Tax?
- Estate Tax – Levied on the deceased’s estate before distribution to heirs.
- Inheritance Tax – Imposed on the assets received by the heir.
Inheritance Tax in Ukraine – Key Points
Ukraine does not have a separate inheritance tax; however, inheritances are subject to personal income tax, which is based on the relationship between the heir and the deceased, as well as their residency status. The tax rate does not change based on whether the inheritance is by law or by will.
Personal Income Tax Rates on Inheritances:
- 0% tax: For first- or second-degree relatives when both the heir and deceased are Ukrainian residents.
- 5% tax: For heirs who are not first- or second-degree relatives.
- 18% tax: If either the heir or the deceased is a non-resident, regardless of family relationship.
In addition to income tax, if the heir is liable for the 5% or 18% tax, they must also pay a military tax of 5%. (Until January 25, 2025, the military tax was 1.5%.)
Definition of Close Family Relationships
- First-degree relatives: Parents, children (including adopted children and posthumous children), and spouses.
- Second-degree relatives: Siblings, grandparents, and grandchildren.
Gift Tax
Gift tax is a crucial aspect of planning intergenerational asset transfers. Many property owners consider gifting assets during their lifetime to reduce or avoid inheritance tax. However, gifts can also be taxed at rates similar to or higher than inheritance tax.
In Ukraine, gifts from individuals are taxed based on the relationship between the parties and their residency status.
- 0% tax: If the donor is a Ukrainian resident and the recipient is a first- or second-degree family member.
- 5% tax: If the donor is a Ukrainian resident but the recipient is not a close relative.
- 18% tax: If either party is a non-resident.
If a 5% or 18% gift tax applies, the 5% military tax also applies. (Up from 1.5% before January 25, 2025.)
Exemption for Non-Monetary Gifts
Non-monetary gifts are exempt from tax if their total value does not exceed 2,000 UAH per month. If the gift exceeds this amount, the excess is taxed at 5% personal income tax plus 5% military tax.
In light of the above, planning for inheritance and gift taxes is essential when transferring assets between generations. Proper planning allows for maximizing existing exemptions, significantly reducing tax liability, and ensuring that assets are transferred to the next generation in an organized and efficient manner.
Inheritance Tax in Israel Compared to Ukraine
Unlike Ukraine, Israel does not impose inheritance or estate tax. However, capital gains tax may apply upon the eventual sale of inherited property, calculated based on the asset’s full value at the time of sale.
The tax treaty between Israel and Ukraine includes provisions to avoid double taxation. Proper planning and precise reporting are essential to avoid being taxed twice.
To read the Israel–Ukraine tax treaty in English on the Ministry of Finance website, click here.
Drafting a Will in Ukraine – Why It Matters
Ukraine’s inheritance does not always pass smoothly. In some cases, formal procedures are required, such as obtaining an inheritance certificate or court approval to claim assets.
Creating a detailed will is not just a personal choice, it’s a key part of inheritance tax planning. A clear will ensures assets are transferred efficiently and legally. It should reflect the deceased’s wishes while complying with Ukrainian law to ensure its validity.
In many cases, the person creating the will can choose which country’s laws will govern. This choice can significantly affect inheritance outcomes. Without a will, the law sets that the deceased’s last primary place of residence will apply by default.
If you own assets in Ukraine, it is strongly recommended to prepare a will to ensure your assets pass to heirs as smoothly as possible. A will can prevent confusion, legal battles, and delays after your passing.
Inherited Assets in Ukraine? 7 Steps to Claim Them Properly
Did you receive an inheritance in Ukraine?
7 Steps for Properly Realizing an Inheritance from Ukraine
1. Clarification of Factual and Legal Background
First, check the type of asset to be inherited, its location, the identity and status of the heirs, the value of the asset, and more.
2. Determining the Timing and Location for Realizing the Inheritance
Examine whether it’s advisable to realize the asset now, and if so, where is it better to do so – in Ukraine or in Israel
3. Regulatory and Banking Aspects
It is recommended to check the costs of money transfers, whether there is a need to open an account in Ukraine or another country to transfer funds, what approvals are required, etc.
4. Planning the Asset Transfer
Consider whether to transfer the asset itself or its proceeds, and what the implications are in terms of taxes, exemptions, deductions, etc.
5. Avoiding Double Taxation
In light of the existence of a double taxation treaty – it is recommended to check whether there is a mechanism for crediting tax paid in Ukraine against tax liability in Israel. Ensure that reporting is done correctly and accurately to avoid double payments.
6. Examining Future Effects on the Asset
It is advisable to examine the future effects on the asset – for example, a future sale of the asset will in many cases be subject to capital gains tax in Israel as well.
7. Transferring the Asset to Israel
Performing all required actions, submitting documents, handling matters with banks in Ukraine and Israel, and executing the asset transfer.
How can we help?
The goal is to transfer the inheritance to heirs in Israel in the most tax-efficient manner, while addressing legal issues in both Israel and Ukraine, as well as banking and regulatory matters. For example, whether it is advisable to realize a particular asset in Ukraine or transfer it to Israel; how to transfer inheritance funds to a bank account in Israel; how to utilize various exemptions among heirs; whether to give gifts during one’s lifetime; whether to establish a trust, and more. Strategic planning, by applicable laws and tax treaties, is essential to minimize tax liabilities.
Nimrod Yaron & Co. Law Firm has extensive experience in providing personal and professional guidance to Israelis with assets or inheritances in many countries worldwide, including Ukraine – from the initial planning stage, through dealings with authorities in Ukraine and Israel, to the transfer of inheritance funds to the heir’s bank account.
We work in collaboration with all relevant professional entities in Ukraine and Israel and provide legal solutions both from a tax perspective and a banking perspective, personally tailored to the circumstances of each case.
If you have inherited an asset or wish to bequeath assets in Ukraine in the future, our team of attorneys specializing in international taxation and inheritance law would be happy to advise you on this matter – contact us for an initial consultation.
Q&A
Is there tax liability on inheritances, gifts, or estates in Ukraine?
In Ukraine, there is no direct tax on inheritances, gifts, or estates. However, income from inheritances and gifts is considered income and subject to personal income tax, according to the degree of relationship between the parties and their residency status.
Do I need to pay tax in Israel on assets inherited from Ukraine?
No. There is no inheritance tax in Israel. However, capital gains tax may apply after selling the asset. It is important to check the recommended timing for selling an inherited asset.
Why is it important to plan the transfer of assets between generations in advance?
The transfer of assets between generations from abroad is not just a family matter but also a tax and economic issue. Early planning, considering legal issues in Israel and abroad, can save a lot of money and prevent legal complications.
How can inheritance be realized optimally while saving ontaxes?
To realize the inheritance optimally and save unnecessary tax payments, all tax options should be examined, including utilizing exemptions, planning gifts, establishing companies, trust funds, and more.
How can the inheritance tax liability in Ukraine be reduced?
Through early tax planning, which includes drafting a will, utilizing exemptions, giving gifts during your lifetime, and more, you can significantly reduce your tax liability.
Is it better to give an asset as a gift during a lifetime or to bequeath it?
The choice between giving a gift and bequeathing depends on the circumstances of the case. Sometimes a gift will be taxed similarly to an inheritance. Therefore, the legal and tax aspects should be examined before making a decision.
What are the implications in case there is no will?
In the absence of a will, the inheritance will be divided among the legal heirs according to the local inheritance law of Ukraine.
What documents are required for the process of realizing an inheritance in Ukraine?
To realize an inheritance in Ukraine, documents such as a death certificate, a will (if one exists), copies of the heirs’ ID cards, property ownership documents, bank account confirmations, and more are required.
How long does the process of realizing an inheritance in Ukraine take?
It should be considered that the process of realizing an inheritance in Ukraine can take from several months to a year or more, depending on the complexity of the testator’s estate, the number of heirs, the existence of a will, and other factors.
