As of 1 January 2014, corporate property tax on certain real estate properties may become calculated on the basis of cadastral value instead of book or inventory value

15.11.2013

Legal Update No. 440, 15 November 2013

Goltsblat BLP advises that Federal Law No. 307-FZ of 02 November 2013 “On Amendment of Article 12 of Part One and Chapter 30 of Part Two of the Tax Code of the Russian Federation” was signed on 03 November. The Law relates to calculation and payment of property tax on the basis of the cadastral value in relation to certain real estate properties. The changes come into effect on 01 January 2014.

The Law amends article 12 of the general part of the Tax Code of the Russian Federation by empowering legislative bodies of constituent entities of the Russian Federation to establish specifics for determining the tax base for regional taxes. The amendments also apply to Chapter 30 of the Tax Code by providing for the tax base for certain real estate properties to be calculated proceeding from their cadastral value determined on 1 January of the relevant tax year.

The new changes and specifics for calculating the tax base on the basis of cadastral value apply to the following real estate properties:

  • administrative and business centres, retail centres (complexes) and premises therein;
  • non-residential premises intended, according to the cadastral passports of the real estate property or technical report (inventory) documents, for accommodating offices, retail outlets, public catering and domestic services facilities or actually used for these purposes;
  • real estate properties belonging to foreign organisations not operating in the Russian Federation through permanent establishments or not relating to the activities of the given organisations in the RF through permanent establishments.

The law defines administrative and business centre, retail centre, actual use of non-residential premises for accommodating offices, retail outlets, public catering and domestic services facilities and other terms required for calculating and paying tax on the basis of the cadastral value.

It is laws of the constituent entities of the Russian Federation that define the specifics for determining the tax base for certain real estate properties proceeding from their cadastral value.

At the same time, such a law may be passed in relation to administrative, business and retail facilities, as well as ones actually used for accommodating offices, retail outlets, public catering and domestic services, only after the given constituent entity has approved the cadastral value determined for the real estate properties. Once such a law is passed, there can be no return to determining the tax base for the given properties on the basis of the average annual value.

A special rule is established in relation to real estate properties belonging to foreign organisations not operating in the Russian Federation through permanent establishments or not relating to the activities of the given organisations in the RF through permanent establishments. This stipulates that, if no cadastral value has been determined for such properties, the tax base is taken as zero.

The Law sets the maximum property tax rates for real estate properties for which the tax base is determined as the cadastral value. In Moscow in 2014, for instance, the rate may not exceed 1.5%, in 2015 – 1.7%, in 2016 and subsequent years – 2%. For other constituent entities of the RF, the rate in 2014 must not be over 1%, in 2015 – 1.5%, and in 2016 and subsequent years – 2%.

The Law also envisages that, in relation to real estate properties for which the tax base is determined as the cadastral value, the tax and advance tax payments are to be made into the budget at the location of the property, as well as other specifics of calculating and paying corporate property tax on real estate properties for which the tax base is determined as the cadastral value.

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