Confirmation of the source of funds when purchasing an apartment in Ukraine

With the tightening of financial controls, the issue of confirming the origin of funds when purchasing an apartment in Ukraine is becoming increasingly relevant. Banks, notaries, and tax authorities have become stricter in their approach to verifying large payments, and Ukraine's participation in the international financial data exchange system has led to real estate transactions now being subject to more detailed scrutiny.

Even if the money has been accumulated over many years and obtained legally, its origin must be proven. Otherwise, the transaction may be delayed or not take place at all. In this article, we will look at when and who needs to confirm the source of income, what documents are suitable for proving the legality of income, whether it is possible to do without such confirmation, and what the consequences may be if the buyer is unable to explain the origin of their money.

Is it necessary to confirm income when buying an apartment?

Most often, when purchasing real estate, confirmation of the origin of funds is required. Formally, when signing a purchase and sale agreement, the law does not oblige the buyer to provide proof of income. At the same time, in practice, without documentary proof of income, it may be impossible to pay for real estate.

Any financial transaction is subject to mandatory financial monitoring, especially if the payment amount exceeds UAH 400,000 or its equivalent in foreign currency. The bank must ensure that the money has not been obtained illegally and that the buyer's official income corresponds to the cost of the property being purchased.

If there are no documents to confirm income, the bank may block the payment or request additional explanations. To avoid delays in concluding the transaction and not disrupt it, it is best to take this issue seriously, rather than as a mere formality.

What documents confirm the legality of funds

The list of documents required to confirm the origin of funds is quite extensive, as it depends on the sources of funds obtained by the buyer of the apartment. The bank or notary cannot request a single specific document, as one client may need to provide a certificate of income from their place of work, while another may need to provide a loan agreement.

Here is a list of documents that can confirm the origin of funds:

• income statement — for officially employed persons, showing the amount of wages received and taxes withheld;

• certificate from the Pension Fund — for pensioners receiving state benefits;

• tax return — suitable for entrepreneurs, landlords, investors, and those who receive interest, insurance payments, winnings, and other types of income;

• certificate of inheritance rights — for those who received money after acquiring inheritance;

• gift agreement — if the funds for the apartment were gifted by relatives (they, in turn, will have to confirm the origin of these funds);

• property purchase agreement — if the funds were obtained through the sale of a car, land plot, or other real estate;

• loan agreement — in the case of a bank loan for the purchase of housing;

• bank statement confirming the source of funds — when the money has already undergone financial monitoring in the client's account;

• documents pursuant to a court decision — if the funds were received after the decision was enforced, for example, through debt collection or compensation.

The buyer's main task is to show that the money was obtained legally. The more understandable and logical the financial history looks, the faster the verification process goes and the less chance there is of the transaction being delayed.

Is it possible to avoid confirming the source of funds when buying an apartment?

Buying an apartment without confirming your income source is possible in practice, but it's risky and often leads to delays or payment refusals. As mentioned above, the law doesn't directly require buyers to provide income documents. Still, banks, notaries, and tax authorities have the right to ask for this confirmation as part of financial monitoring.

Even if the buyer wants to pay the seller of the apartment in cash, this does not exempt him from verification. Financial monitoring applies to all large transactions regardless of the form of payment. The bank may request documents for any transaction exceeding UAH 400,000. A notary may take such measures when registering a real estate purchase and sale agreement if they notice any discrepancies.

In some cases, the transaction can be completed without additional confirmation. This may happen if the funds were already in the account and had previously been verified, or if the payment amount is not too large. Nevertheless, it would be advisable for the buyer to prepare at least basic documents on income or the origin of funds, as there is a possibility that the payment will be put on hold and the purchase postponed indefinitely.

Consequences of failure to confirm the origin of funds

If a buyer cannot confirm the legality of their funds when purchasing an apartment, this may lead to problems with the bank and tax authorities. The bank may block the payment, making it impossible to complete the transaction. The client may simply be denied service or have the transaction suspended for additional verification. The bank may also forward the information to financial monitoring authorities.

The tax authorities may check whether the real estate buyer's expenses correspond to their declared income and impose additional taxes and penalties for any discrepancies between income and expenses. A more serious problem is the initiation of proceedings for tax evasion.

The absence of documents confirming the origin of funds always poses a risk of delaying the transaction and increasing costs due to the need to re-prepare the package of documents. It is best to collect and prepare all supporting documents in advance to avoid unpleasant situations and purchase an apartment safely and without delays. At the Mayak agency, realtors work in a team with lawyers, so you can always get advice on what documents to prepare to confirm your income when buying a home.