Land payment: when a tax obligation arises

Concept and structure of land payments
The legislator treats land payments as part of the property tax, which is levied in the form of land tax and rent for land plots owned by the state or municipalities. Land tax is paid by owners and permanent land users, while rent applies to tenants of such plots where a lease agreement has been concluded.
The object of taxation for land tax is land plots and land shares that are in the ownership or permanent use of the taxpayer. For rent, the actual object is the right to use a land plot on the basis of a contract, and the amount charged is determined by the terms of this contract within the limits set by the Tax Code.

General conditions for a tax liability to arise
The tax liability in the area of land payments follows the general rules of the Tax Code. The taxpayer must pay tax from the moment the circumstances arise that the Code links to the obligation to pay, and this obligation is unconditional and has priority over other, non‑tax obligations. Such circumstances for land payments include, in particular, the acquisition of ownership, permanent use, or lease rights to a land plot, as well as other legal facts directly provided for in the Code.
Importantly, the tax liability does not depend on whether the tax has been assessed by the tax authority or whether the taxpayer has received a tax notice‑decision. The tax authority calculates and sends tax notices, but this is only an element of enforcing an already existing obligation and not a ground for its emergence.

Ownership and permanent use as a basis for obligations
For owners and permanent land users, the basis for a land tax obligation is the very fact of acquiring rights to the plot, and land payments are charged from the day the ownership or use right arises. The moment when such a right arises or terminates is usually linked to state registration in the State Register of Property Rights, rather than to the date of signing a contract or decision of a public authority. Loss of the right (disposal, termination of use, termination of the relevant act) stops further accrual of tax but does not release from paying amounts already charged for the period when the right existed.

Land rent: the lease agreement as legal basis
The ground for a rental obligation to arise is the lease agreement for the land plot, not the general rules on land tax. Mere factual use without a properly formalised agreement does not create a rental tax obligation for the purposes of the Tax Code, although it may entail other legal consequences (civil liability, additional assessments, penalties, etc.). For state and municipal land, the agreement sets the essential terms, including the amount, procedure, and deadlines for paying rent. The obligation to pay rent arises after the lease right passes to a new entity and this right is registered with the state; until then, the previous tenant remains the payer.

Date when obligations arise and accrual period
The Tax Code provides that owners and land users pay land charges from the day their ownership or use right to a land plot arises and stop from the day it terminates. For individuals, the tax authority calculates the tax based on data from the State Land Cadastre and the Register of Property Rights and sends tax notices‑decisions, as a rule, by 1 July of the current year.
If no assessment was made earlier, the tax authority may assess additional tax liabilities for past periods within the 1,095‑day limitation period established by Article 102 of the Tax Code. In practice, this means that an individual may be charged land tax for the last three years, regardless of whether notices were sent previously, provided that the land right existed and was not terminated.

Minimum tax liability on land
The minimum tax liability (MTL) for agricultural land ensures a minimum level of tax burden on land users regardless of business results and income. It is calculated using a formula that takes into account the normative monetary valuation, the area of the plot, a coefficient of 0.05, and the number of months of ownership or use during the year. The MTL is compared with the total amount of taxes and fees paid on this land; if that amount is lower, the taxpayer is charged the difference.

Importance of correct registration of land rights
Since the basis for the emergence or termination of land‑payment obligations is the legal fact of acquiring or losing rights to a plot, proper documentation and timely registration of these rights are crucial for tax consequences. Discrepancies between the actual use of land and the data in the cadastre or registers lead to additional assessments, disputes with tax authorities, and financial sanctions. Taxpayers must monitor changes in the designated use, area, and boundaries of plots and promptly reflect them in the registers, as these parameters form the tax base. Poorly documented lease relations, use without valid contracts or under expired contracts sharply increase tax risks and the likelihood of claims from supervisory authorities.

If you have questions or issues related to documenting land rights, determining the grounds for land charges, or appealing tax notices‑decisions, seek professional advice to analyse your situation and minimise potential risks.

Author – Svitlana Krutorohova, attorney at the law firm “Legal Company ‘WINNER’”.