30.12.2013 Karina Starikova, junior associate at Maxima Legal

New corporate property tax computation rules for some immovables

Federal Law No. 307 FZ On Amending Section I, Article 12, and Section II, Chapter 30, of the Tax Code of the Russian Federation dated November 02, 2013 (hereinafter – FZ No. 307) describes the specifics of tax base computation for some items of immovable property.

Following the amendments made to Chapter 30 of the Tax Code of the Russian Federation, the tax base of some items of immovable property shall be made up of their cadastral value effective as of January 1 of the relevant tax period and approved according to the prescribed procedure.

The new tax base computation rules shall apply to the following taxable items of immovable property:

1) administrative and business centers, shopping malls (complexes) and offices inside such buildings;
2) non-residential premises intended for offices, retail stores, catering and public service facilities according to their cadastral passports or technical (inventory) records or actually used for offices, retail stores, catering and public service facilities;
3) items of immovable property owned by foreign companies that do no operate in the Russian Federation through permanent representative offices and items of immovable property owned by foreign companies and unrelated to their activities in the Russian Federation through permanent representative offices.

Considering that corporate property tax is a regional charge, the constituent entities of the Russian Federation need to adopt a law which would define the specifics of tax base computation depending on the cadastral value of immovable property listed in clauses 1 and 2 above. However, this law can only come into force after the regional authorities approve the results of cadastral value assessment according to the prescribed procedure.

In addition, as soon as the region adopts such a law, the tax base for immovable property items listed in clauses 1 and 2 above could not be determined as their average annual value anymore.

When the cadastral value of building is known but the cadastral value of taxable room inside such building is not determined, the tax base for this room shall be computed as a share in the cadastral value of the whole building depending on the part occupied by the room in the total area of building.

Moreover, not later than on the 1st day of the next tax period, the competent executive agency in the constituent entity of the Russian Federation shall make a list of immovable property items indicated in clauses 1 and 2 above to be taxed depending on their cadastral value in the relevant tax period.

Should any missing items of immovable property be identified in the above list as of January 1st during the tax period, they shall be added to the list to be made by the competent executive agency in the constituent entity of the Russian Federation for the next tax period.

Article 378.2 of the Tax Code of the Russian Federation states that these rules shall apply to the companies that own the items of immovable property taxed on the basis of their cadastral value. However, it seems to be more reasonable to include the reference to a tax duty subject in article 373 of the Tax Code of the Russian Federation, which deals with taxpayers.

It should also be noted that the Tax Code of the Russian Federation sets tax rate thresholds for the items of immovable property taxed on the basis of their cadastral value. For example, it is supposed to be 1.5% in 2014, 1.7% in 2015 and 2% from 2016 onwards in such federal city as Moscow.

The provisions of FZ No. 307 which introduces new rules of corporate property tax computation shall come into force on 1 January 2014 but not earlier than a month after its official publication and the 1st day of corporate property tax period.