The lawyer and partner at Lawyer HUB, Maria Konradiy, explained the circumstances in which banks and the tax authorities may pay attention to money transfers between individuals and what determines their tax status.
Transfers between close relatives — when the zero rate applies
The law distinguishes close relatives of the first and second degree: parents, husband or wife, children (including adopted children), full brothers and sisters, grandparents and grandchildren. Konradiy emphasises that money given without an obligation to return it is treated as a gift.
“If funds are transferred without an obligation to return them, such a transaction may in substance correspond to a gift agreement,” Konradiy explains. Transfers between these persons are taxed at a zero rate if the donor is a resident and the transfer is indeed a gift, not payment for work or services.
“No declaration is filed for such income (the declaration is the official tax report of an individual), and the military levy is not collected,” Konradiy says. Ordinary monthly support to parents does not create a tax liability solely by virtue of the transfer.
Exceptions: unmarried cohabitants and non-residents
Konradiy warns that for couples living together without a registered marriage, such a transfer is considered other income under the Tax Code and is taxed on general grounds, with income tax and the military levy applied. If the donor is a non-resident, the rate is 18% for any object, regardless of kinship.
The lawyer notes that, where appropriate, maintenance payments can be considered: adult children are obliged to support parents who cannot work and require assistance. Alimony is not taxed, even when paid by a non-resident.
Gifts from other people: 5% tax and a declaration
Friends, sons‑in‑law, daughters‑in‑law, stepfathers and stepmothers are not part of the close circle. In such cases the recipient must include the income in their annual declaration and pay a 5% income tax and a 5% military levy.
Deadlines: submit the declaration and pay the tax by 1 May and 1 August respectively. A fine of 340 hryvnia applies for a failure to file the declaration.
No relief for small amounts: “The non‑taxable limit equal to 25% of the minimum wage does not apply to cash gifts. The law makes an exception for cash payments of any amount,” Konradiy clarifies. If money arrived from an entrepreneur’s account, it may be considered a gift from a self‑employed person and taxed at a rate of 18%.
“A gift agreement for currency valuables between individuals in an amount exceeding fifty non‑taxable minimums is concluded in writing and notarised. For these purposes the minimum is 17 hryvnia, so the threshold equals 850 hryvnia,” Konradiy says.
Documents and explaining the source of funds to the bank
The bank may ask about the origin of the money. For family support, documents proving kinship and confirmation of the sender’s source of funds are usually sufficient.
Konradiy advises keeping documents for significant sums: this will help to explain the purpose of the payment and its origin, especially if the recipient immediately purchases real estate, a car or other expensive assets after receiving the funds.
