Ivan Tsvetkov, Senior Tax Consultant at Tax Compliance, in his article for RIA Novosti Real Estate, analyzed the main changes in the calculation and payment of tax, as well as considered the possibilities for reducing the tax payment.

What happened?

In 2023, on the basis of Federal Law No. 269-FZ dated 31.07.2020, the cadastral value of buildings, premises, structures, construction in progress, and parking spaces was revalued throughout Russia. Reports on the results of the assessment carried out in each region are available on the Rosreestr website in the "State Cadastral Valuation Data Fund" section.

Earlier, some media have already published information about the average increase in the cadastral value of housing in Moscow by 21%, based on the results of the revaluation. In this context, it should be noted about the increase in personal property tax for owners of Moscow housing, since the tax base for calculating this tax is the cadastral value of property.

Peculiarities of calculation and payment

It should be noted separately that the updated cadastral value for the purposes of tax calculation is valid from January 1, 2024. This means that property tax for 2024 according to the updated cadastral value will have to be paid by December 1, 2025 (paragraph 1 of Article 409 of the Tax Code of the Russian Federation). At the same time, by virtue of the direct limitation specified in paragraph 8.1 of Article 408 of the Tax Code, the tax payment may not be increased by more than 10% during the tax period (calendar year), regardless of how much the cadastral value has increased. Thus, even if the cadastral value of housing in Moscow increases by 21%, the property tax payment for 2024 may increase by no more than 10%.

This approach will be applied accordingly in subsequent tax periods. Thus, this tool is designed to minimize a one-step significant increase in the tax payment for taxpayers.

At the same time, according to paragraph 3 of clause 8.1 of Article 408 of the Tax Code, the exception to this rule is situations where:

• the characteristics of the object of taxation change during the tax period (clause 5.1 of Article 408 of the Tax Code of the Russian Federation);
• the object of taxation is the property included in the special List (clause 7 of Article 378.2 of the Tax Code of the Russian Federation) determined by the authorized executive body of the subject: (a) administrative and business centers, shopping centers (complexes) and premises in them, (b) non-residential premises used for offices, retail facilities, public catering and consumer services (or if the information from the Unified State Register of Legal Entities or technical registration documents provides for such use). An exception to the list of such objects are garages and parking spaces located in such objects;
• the object of taxation is the property formed as a result of division or other action over the object included in the above List (paragraph 2, item 10 of Article 378.2 of the Tax Code of the Russian Federation).

It is important to take into account that since the revaluation of the cadastral value of property was carried out throughout the country, the change in the amount of the tax payment will affect not only Muscovites, but also residents of other regions. If, as a result of the revaluation, the cadastral value of real estate in a region has been increased, the amount of the tax payment will correspondingly increase.

Can the tax payment be reduced?

Tax legislation provides for a number of opportunities to reduce personal property tax payments.

1. benefit for certain categories of citizens

For a number of property, paragraph 1 of Article 407 of the Tax Code of the Russian Federation provides a benefit in the form of tax exemption, for example, for pensioners, military personnel, disabled persons and other categories of citizens.

It is important to note that the benefit is granted in respect of one object of taxation owned by the taxpayer and not used by him in entrepreneurial activities (par. 2, 3 of Art. 407 of the Tax Code of the Russian Federation).

In order to receive the benefit, an application must be submitted to the tax authority together with documents confirming the right to apply the benefit.

At the same time, the legislation (paragraph 5 of Art. 407, subparagraph 2, paragraph 2 of Art. 406 of the Tax Code of the Russian Federation) establishes restrictions on the application of the benefit. Thus, the following real estate objects (except for garages and parking spaces located in such objects) cannot be claimed the benefit:

included in the above List of immovable property objects;

formed as a result of a partition or other action over a Listed Item;

the cadastral value of which is more than 300 million rubles.

It should also be noted that at the local level, additional benefits may be provided, as well as the grounds and procedure for their application (paragraph 2, item 2, article 399 of the Tax Code of the Russian Federation).

2. Deduction for large families

In addition to this benefit, paragraph 6.1 of Article 403 of the Tax Code of the Russian Federation provides for the right of individuals to apply a tax deduction if the taxpayer has three minor children.

Under this provision, the tax base of property (the cadastral value from which tax is calculated) is reduced by the amount of the cadastral value:

• 5-square meters of the total area of the apartment, area of a part of the apartment, room;
• 7-square meters of the total area of the residential house, part of the residential house.

In this case, a deduction in the specified amount is applied for each minor child.

3. challenging the cadastral value

As an alternative way to reduce the tax payment, it is possible to consider the option of challenging the cadastral value of the taxable object. To implement such a method of legal tax optimization, it is necessary to understand whether the cadastral value of a real estate object exceeds its market value?

A competent answer to this question can be provided by an appraiser after conducting an appropriate study. Therefore, initiating a process to challenge the cadastral value makes sense only if the appraiser establishes that the cadastral value exceeds the market value.

Tax Compliance specialists have extensive experience in implementing such projects and will be happy to assist you if you have any questions.