Income Confirmation for Apartment Purchase in Ukraine

Our company has been providing legal support for real estate transactions in Ukraine, including remote services, for over 16 years. However, recent changes and updates to legislation and regulations have led to significant changes in the apartment buying process. With rising real estate prices and new legal requirements, the issue of income verification has become especially relevant.

In this article, we will address a frequently asked question from our clients: Is an income certificate required when buying an apartment? We will also explain how recent legal changes have affected this process overall.

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Who Needs to Prove the Source of Funds?

Let's explore why banks have started questioning the legality of the source of funds. Since Ukraine became a full participant in the automated exchange of financial account information under the Common Reporting Standard (CRS), verifying the legitimacy of the source of funds has become a critical step in real estate transactions.

When making a payment for a property, the bank manager must comply with financial monitoring requirements and obtain documentary evidence that:

• Your income comes from a legitimate source;
• Your official financial status aligns with the property’s value you intend to purchase;
• The transaction is not related to money laundering, meaning the funds are properly taxed and not obtained illegally.

If you are purchasing an apartment or any other property worth more than 400,000 UAH, you will inevitably need to prove the legality of your funds.

First of all, income verification is required for individuals who have kept money in cash, including foreign currency. If your funds are in a bank account, the bank has usually already verified the legitimacy of these funds in accordance with financial monitoring standards. Banks are required to verify any payments and accounts exceeding 400,000 UAH or its equivalent in foreign currency.

Please note: Property buyers do not need to provide proof of their property or income.

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Methods of Income Verification When Purchasing an Apartment

The document required to confirm the legitimacy of your funds depends on the source of your income. For example, the following documents may be submitted:

• Income and property declaration for the previous year: if the source of income includes rental income, business activities, dividends, interest, royalties, insurance payouts, winnings (e.g., from lotteries or casinos), charitable donations, or other similar payments;
• Salary certificate – for formally employed individuals, or a pension payment certificate – for pension recipients;
• Inheritance certificate: if the funds were inherited;
• Insurance company statement confirming a payout under an insurance policy;
• Sale agreement: for the sale of shares, land, property, etc. (the sale price should match the market value, and there should be no negative information regarding the seller or issuer);
• Gift agreement: if the funds were received as a gift from family members. In such cases, the donors must confirm the legitimacy of the funds;
• Casino or lottery winnings documentation: if the individual won in a casino or lottery, they should provide a document confirming the win;
• Loan agreement: if the funds were received as a loan from a financial institution;
• Bank statement showing the balance in your account, with confirmation that the bank has verified the source of the funds;
• Tax authority certificate confirming the payment of taxes;
• Bank certificate confirming that the funds transferred to your account are a result of a court decision or interest payments from a deposit.

During the verification process, the bank must confirm that the funds genuinely belong to you and that you are not a nominal owner of the assets. It must also be verified that the funds have come from legitimate market transactions and legal sources.

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Who and How Verifies the Source of Funds?

Some clients believe that paying for property in cash can help avoid scrutiny. However, the method of payment (whether cash or bank transfer) doesn’t really make a difference. It’s important to remember that verification is carried out not only by the bank but also by the tax authorities.

If you're considering buying an apartment with cash, our lawyers can guide you through the process and help assess all potential risks. For instance, it's essential to consider whether to lower the price below market value, which currency to use for the transaction, how to specify payment terms in the contract, and which transaction method carries fewer risks.

In addition to bank managers, the tax authorities may also raise questions about income verification and the legal source of funds when purchasing property. Typically, the tax authorities will check the following:

• Whether the price of the property matches the amount of money you've declared and paid taxes on. Your tax declaration should reflect the necessary income and clearly indicate the source of the funds, even if they were from a gift or inheritance.
• Whether your reported income matches your actual expenses.

Our lawyers can assist in preparing for such a tax inspection by reviewing your tax declarations, bank statements, and original documents. This will help ensure that your financial documentation is correct and allow you to avoid any issues during the verification process.

How We Can Assist You

Our company has specialists who offer a full range of services to confirm the legitimacy of your funds, ensuring that the purchase of your desired apartment does not turn into a legal issue or court dispute. With our experience and comprehensive approach, we will guide you through the bank's compliance process, financial monitoring, and tax authority checks, ensuring the transparency and legality of every transaction.

Additionally, our services include:

• Choosing the best financial approach: We will analyze your situation and recommend the most efficient method for proving the source of your funds, taking into account all legal requirements and your unique circumstances.
• Full-service document preparation: We handle all the details of document collection and preparation. We know exactly which documents need to be obtained, how to write the required explanations, and how to complete the necessary forms and applications correctly.
• Representation by power of attorney: If needed, we can represent you in dealings with banks and government agencies through a power of attorney. This will save you time and spare you from direct interactions with financial institutions and public officials.

Don't let bureaucratic hurdles and legal complexities stand in the way of your dream. Reach out to us today, and we’ll ensure you receive professional support and peace of mind during your important financial transaction.