For citizens, property tax is regulated by Chapter. 32 of the Tax Code of the Russian Federation, which specifies subjects and objects, period and rates, benefits, calculation and payment procedures. The subjects are the owners of property recognized as the object of taxation.
According to Art. 401 of the Tax Code, taxable objects are buildings, structures, residential buildings, apartments, garages, parking spaces, and objects for which construction has not been completed. For these objects, the taxable base is determined by cadastral or inventory value, depending on which particular base needs to be applied in a particular subject of the Russian Federation. According to the law, all subjects of the Russian Federation are required to switch to using cadastral value no later than 01/01/2020.
Classification of commercial real estate
First of all, let's understand what commercial real estate is. There is no definition of this concept in the Tax Code of the Russian Federation (TC RF). Based on current practice, commercial real estate includes objects that directly or indirectly allow you to generate income and are most often rented out for the activities of entrepreneurs or enterprises.
Typically these objects include the following:
- business centers;
- offices;
- hotels;
- warehouses;
- production workshops;
- boarding houses;
- night clubs;
- restaurants;
- bars;
- the shops;
- exhibition centers;
- concert halls;
- shopping and entertainment complexes;
- cinemas;
- private museums;
- apartments and other similar objects.
It is very important to distinguish between residential and commercial real estate. In a tax context, this is of great importance. The tax rate for housing is set at 0.1% of the cadastral value. For commercial real estate it can reach up to 2%.
How to calculate commercial property tax?
Real estate tax is calculated based on its cadastral value. This applies to all objects, except those for which the tax must be calculated based on the average annual cost. As a rule, this category of objects is rather an exception. You can understand what exactly belongs to which group if you carefully study regional legislation on this matter. Often exceptions are established precisely at the level of constituent entities of the Russian Federation. In addition, regional legislation allows you to determine a specific rate.
Important: tax calculation based on the average annual value is possible in some cases only in relation to commercial real estate owned by organizations. Property tax for individuals is always calculated based on the cadastral value.
What do you need to know about the average annual cost of a property? In this case, calculations are carried out as follows:
- You need to find out the original cost of the object (according to documents).
- Take into account accrued depreciation.
- Subtract the second from the first. This will give you an average annual cost that you can use as a guideline.
The cadastral value is always used as a base for such objects as:
- shopping complexes and any premises that belong to such structures;
- outlets;
- offices;
- administrative buildings.
When and how to pay property taxes for individuals in 2021
Many real estate owners mistakenly believe that if they have not received a notice from the tax service, then they do not need to pay property tax. This is wrong.
On January 1, 2015, the Federal Law came into force, according to which taxpayers, in the event of non-receipt of tax notices, are required to independently inform the tax office about the presence of real estate assets, as well as vehicles.
Information accompanied by copies of title documents must be submitted to the tax office in respect of each taxable item once before December 31 of the year. For example, if an apartment was purchased in 2021, and no notifications were received regarding it, then information must be provided by December 31, 2021.
Therefore, if the notification is not received, the tax authorities recommend that citizens take the initiative and contact the inspectorate in person or through the electronic services of the official website of the Federal Tax Service of Russia www.nalog.ru.
If a citizen independently reports the presence of a taxable item on which tax has not been calculated, the payment will be calculated for the year in which the specified message was submitted.
However, this condition only applies if the tax office did not have information about the reported object. If the payment notice was not sent for other reasons (for example, the taxpayer’s address was incorrectly indicated, or it was lost in the mail), then the calculation will be made for all three years.
Individuals who have access to the Personal Account service may also not receive tax notifications for paying taxes if they have lost or forgotten to change their primary password during the calendar month. Such users, due to account blocking, subsequently have to contact the inspectorate again to activate the service, since all documents, including tax notices, are sent exclusively in electronic form to their personal account.
The Tax Inspectorate invites citizens who have received a primary password, but have not changed it within a month, to contact the nearest tax office of Russia with a passport and restore the ability to access their Personal Account, in connection with the upcoming annual distribution of notifications on property taxes. For failure to submit such a report within the prescribed period, the citizen will be held accountable under paragraph 3 of Article 129.1 of the Tax Code of the Russian Federation in the form of a fine in the amount of 20% of the unpaid tax amount for the object for which he did not submit a report.
What you need to know about property taxes?
According to the current tax legislation of the Russian Federation, real estate tax must be paid once a year. In this case, the calculation can be carried out once or divided into several payments. Some payments may be in advance. The reflection of transactions in tax reporting will directly depend on what exactly you have chosen.
Commercial real estate tax for individuals and legal entities is calculated quite simply: you need to find out the rate and multiply by the base. In most cases, as mentioned above, the cadastral value of the property is used as the base. You can find out the cadastral value of your property by receiving an extract from the Unified State Register of Real Estate.
The interest rate for individuals cannot be more than 0.1%, for legal entities - 2%, as mentioned above. In this case, the specific interest rate is determined at the regional level. Benefits could be provided for certain constituent entities of the Russian Federation (for example, for the Republic of Crimea). But the benefits ended in 2021. That is, now regional authorities will set specific interest rates without concessions, and taxpayers will have to pay the tax office.
Commercial property tax evasion carries a penalty of 20% of the unpaid amount.
If the commercial real estate tax is paid based on the average annual value, then in this case the rate will be 2.2%. But only organizations have this opportunity.
Important: individual business entities can set their own rates at the regional level. This applies to subjects of investment activities and not only. Therefore, when calculating taxes, it is worth taking such nuances into account.
Please note that individual entrepreneurs are not legal entities. However, as standard, the rules that apply to organizations also apply to individual entrepreneurs. But an exception has been made for property taxes. In this case, individual entrepreneurs will pay tax in the same way as individuals. This was implemented in order to reduce the severity of the tax burden in relation to such persons.
Property tax payment deadline in 2021 for individuals in Moscow
In 2021, a single deadline for payment of property taxes has been established for all regions of Russia - no later than December 3, 2021.
Please note that in case of violation of the deadlines for payment of property tax for individuals, a penalty will be charged for the amount of arrears for each calendar day of delay in the amount of one three hundredth of the current refinancing rate of the Central Bank of the Russian Federation. In addition, the tax authority may send a notice to the debtor’s employer to collect the debt from wages, and also impose a restriction on travel outside the Russian Federation.
What taxes must be paid on income from commercial real estate?
Please note that you will have to pay commercial property taxes regardless of whether you use it or not. That is why, when purchasing such property, you need to carefully calculate future income generation patterns. Otherwise, you will receive additional losses.
But when you start making profit from such an object, you will have to pay tax on it as well. And here everything depends on the capacity in which the owner acts.
Individuals may pay taxes on commercial real estate at the following rates:
- 13% is if we are talking about personal income tax. That is, in this case, the owner simply acts as an individual who receives income from the disposal of his property. It will be enough for him to indicate the source of such income in the annual declaration and that’s it;
- 6% on income or 15% on turnover if an individual registers as an individual entrepreneur. In this case, the rate is reduced. But you need to take into account that the individual entrepreneur will still have to pay mandatory annual contributions for himself;
- 4% when receiving income from individuals and 6% when receiving income from legal entities, if the individual registers with the tax office as a self-employed person. This is the most profitable betting option for today. No additional fees are required.
For legal entities the picture will be different. It directly depends on which taxation system the organization chooses:
- 6% from income received or 15% from turnover if the company is on the simplified tax system;
- 20% - on income if the company has chosen the general taxation regime (OSNO).
Individual entrepreneurs also have the opportunity to purchase a patent. In this case, it will be enough for them to pay a fixed amount (depending on the region).
Which is more profitable?
It is quite easy to get confused with a large number of bets, especially if you have just started studying this issue. In reality, everything needs to be assessed not only from the standpoint of generating income from commercial real estate, but as a whole. In particular:
- In most cases, it is obviously more profitable for a legal entity to be on the simplified tax system rather than on the OSNO. However, sometimes a general taxation system is a more preferable option - for large companies, for example, that need to demonstrate a large volume of financial statements. True, in this case, receiving income from commercial real estate becomes just one of the sources of profit, and more often than not, not the main one.
- It is most beneficial for an individual to register as self-employed. This can be done in literally a couple of tens of minutes through a special mobile application. It won’t be difficult to set up automatic tax deductions. But this regime is not widespread throughout the Russian Federation. Therefore, it is worth finding out if you have such an opportunity.
- When choosing between 6% of profit on the simplified tax system and 15% of turnover, think about whether you can confirm regular expenses in sufficient volume, which would be associated with such real estate. Choosing 15% makes sense if you often make repairs, constantly spend money on the services of a cleaning company, etc. But in most cases it is better to stop at 6%.
News
Changes to the Tax Code prohibit increasing the amount of property tax based on cadastral value by more than 10% per year.
The corresponding law was signed by the President of the Russian Federation and published on Friday, August 3, on the official Internet portal of legal information (Federal Law of August 3, 2021 No. 334-FZ “On Amendments to Article 52 of Part One and Part Two of the Tax Code of the Russian Federation”).
Property objects are: private house; apartment or room; garden house; garage or other outbuilding, etc.
Changes in tax legislation do not reduce the tax base (cadastral value) and do not reduce the tax rate, but now the tax will grow to its maximum more slowly, and the one-time burden on the wallet of citizens who have been paying cadastre tax since 2015 will become more gentle.
Also document:
· prohibits recalculating taxes retroactively (before this, a citizen could expect a recalculation for the last three years). Now all recalculations of this kind can be made only in those cases if they lead to a reduction in the amount of tax for the taxpayer;
· for the owner of property who was able to successfully challenge the cadastral value, the tax will be calculated anew; recalculation will be made from the moment when the incorrect cost was first applied;
· disabled children have been added to the list of beneficiaries exempt from paying taxes.
The changes will come into force on January 1, 2021, but regions can switch to these rules this year.
New procedure for recalculating tax amounts as a result of errors
The Federal Law also provides for a new procedure for recalculating payments in the event of an erroneous cadastral value. The amended assessment will be applied not from the year the application for challenge was filed, but from the moment of the error in the assessment of the property. Corresponding amendments have been made to Article 409 of the Tax Code of the Russian Federation. And this will enable taxpayers to reduce tax amounts for previous periods if the cadastral value of their property turned out to be overestimated.
New benefits and deductions Now taxpayers have the right to make a deduction from the tax base in the amount of the cadastral value of 20 square meters. meters of total area not only in relation to the apartment, but also part of the residential building. A deduction is also provided for part of the apartment, but it is 2 times smaller and amounts to only 10 square meters. A similar procedure is provided for the taxation of rooms. And in Article 407 of the Tax Code of the Russian Federation, beneficiaries for this tax were added, and now disabled children can receive a tax benefit.
When the law was adopted, it was announced that as a result of the entry into force of all these amendments to the Tax Code of the Russian Federation, the Russian budget would lose about 6 billion rubles. This means that taxpayers-citizens will actually be able to save money.
Property tax benefits for categories of citizens
What benefits will remain for military personnel, disabled people and other working pensioners in 2021?
The new law also provides tax benefits for disabled children and clarifies the status of real estate such as houses, apartments, rooms, garages and parking spaces for tax deductions and preferential rates.
It should be taken into account that previously the owners of garages and parking spaces located in office and non-residential buildings for domestic purposes, when calculating taxes, did not have the right to claim benefits and reduced tax rates, unlike the owners of the same objects located in residential buildings. Now the tax benefits apply to them as well.
The law ensures that provisions for new tax incentives are given retroactive effect. That is, a tax refund or recalculation will be made. From 2015 - regarding tax benefits for disabled children, from 2021 - regarding the taxation of garages and parking spaces located in real estate for commercial, office and household purposes.
As is known, until January 1, 2021, the cadastral value of real estate in Russia was determined by independent appraisers, and approved by regional and local authorities.
In what cases is it worth challenging the assessment?
After the Law “On State Cadastral Valuation” came into force on January 1, 2021, the approach to cadastral valuation of real estate has changed. It provides for the introduction of the institute of state cadastral appraisers and the transfer of powers to determine the cadastral value to state budgetary institutions, which will determine the cadastral value on an ongoing basis.
All responsibility for the work of the new government structures for conducting cadastral valuation will be assigned to regional authorities.
Now cadastral valuation will be carried out using a unified methodology throughout Russia. The new mechanism is aimed at preventing mistakes and, as a result, reducing the number of requests for revision of cadastral value, Rosreestr notes.
This law also provides for the transition to new rules from 2020. But regions can do this if they wish as early as 2018. According to Rosreestr, such a decision has already been made by regional authorities in 36 regions.
The procedure for applying cadastral value when taxing real estate
From January 1, 2021, the procedure for using cadastral value when taxing real estate will be changed.
The law introduces uniform rules for the use of cadastral value when determining the tax base for land tax, corporate property tax and personal property tax. From 2021, real estate taxation will be carried out only on the basis of the cadastral value entered into the Unified State Register of Real Estate. And also in the event of its change as a result of establishing the market value of the property by decision of a commission under the Rosreestr body or a court.
In the event of a change in the qualitative or quantitative characteristics of the taxable object, the adjustment of the cadastral value will be taken into account from the date the information is entered into the Unified State Register of Real Estate, which is the basis for the adjustment. When a technical error is corrected in the Unified State Register or reduced due to the correction of other errors, the new amended cadastral value will be applied from the date from which the information about the erroneous cadastral value was applied. If the specified value changes based on the establishment of the market value of the object by decision of the commission or court, then information about the changed value will be taken into account from the date of application of the disputed cadastral value when determining the tax base.
Such rules will apply to information about changes in cadastral value entered into the Unified State Register of Real Estate on grounds that arose from January 1, 2021.
