Ukrainian Prime Minister Yulia Tymoshenko has unveiled a “wealth tax” for affluent property and landowners, among a number of measures drawn up by her government to boost state coffers.   

The tax will be imposed from 1 November 2008. On her homepage, Tymoshenko said the levy will apply “on large villas and plots of land” and the revenue will help significantly boost local budgets.

“Today there are grounds to introduce a tax on wealth, where people live luxuriously, to benefit local budgets,” Ms Tymoshenko told the Ukrainian parliament last week, according to Business Week.

The Ukraine is an important real estate market for wealth managers such as Haydon Investments, a Dublin-based property firm that targets high net worth clients, family trusts and large property firms. Haydon has been operating in the region since 2006.  

In August, according to Ireland’s Sunday Business Post, the fund said "the country is well positioned to provide returns."

“Growth over the last number of years is around 7 per cent per annum and there has been a big increase in the number of international firms moving into the country over the past two years," it said.

"The situation is that the country has been almost unaffected by the credit squeeze. People didn’t have any mortgages, there is virtually no borrowing over there,” said Peter Haydon, chief executive of Haydon Investments.

About $500 million poured into the commercial real estate market last year, according to the Kiev offices of Colliers International, the property consultant, cited in the Sunday Business Post.

Much of the action is still in Kiev, the capital. But activity is spreading fast to five other cities with populations of one million or more, Nick Cotton, head of UK property consultancy company DTZ’s Kiev operation told the Financial Times, earlier this year.

“The property investment market in Ukraine, though still immature by western standards, has continued demonstrating increasing activity and is becoming more sophisticated,” said Mr Cotton.

Structured investment instruments, including real estate funds, appeared in Ukraine last year offering international investors exposure to a fast-growing market. Private placements and IPOs by newly established real estate funds raised $664m last year, according to Tomas Fiala, head of the Kiev-based investment bank Dragon Capita, in the FT.

The Ukrainian market is not of EU-standard transparency yet. But the arrival of international real estate companies is likely to help increase the data circulation in the market. Local laws and planning regulations can be difficult for outsiders to deal with and this new tax also makes the country a less desirable investment area.