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Bill on the state cadastral valuation: new tax risks for businesses and individuals


The Russian Ministry of Economic Development has drafted a bill “On State Cadastral Valuation” (available here in Russian) which will completely overhaul the procedure for determining the cadastral value of immovable property and the procedure for challenging it (the “Bill”). Public discussions of the Bill completed on 15 December 2015 and the Bill was subsequently submitted to the Government to be fine-tuned.

There is good reason to believe that the Bill will be reviewed by the lower chamber of the Russian parliament. In this case, the proposed changes may affect the amount of property tax to be paid as the cadastral value of the relevant immovable property forms the basis for the calculation of this tax (in relation to the property of legal entities – since 1 January 2015; and to that of individuals – with effect from 1 January 2016).

Currently, cadastral valuation is carried out by service providers which are selected by the authorities as a result of tenders and which employ at least two appraisers who are members of a self-regulatory organisation of appraisers. Under the Bill, valuation functions will be fully transferred to budget-financed organisations (“Public Valuers”). The proposed changes will result in the cadastral valuation of real estate being monopolised by Public Valuers. It is also likely that the cadastral value of a property will be overstated since Public Valuers will be authorised to conduct the valuation by the regional Departments of the Federal Service for State Registration, Cadastre and Cartography (“Rosreestr”) and in view of the fact that the property tax will be paid to the budget of the regions of the Russian Federation.

Under the Bill, the valuation of the cadastral value carried out by a Public Valuer will be approved by an authorised regional body and will thereafter be officially published (including on the internet). Within three business days of publication, the valuation will become effective and will be sent to Rosreestr for the purposes of state cadastral registration.

Public Valuers will also be authorised to review applications relating to technical or methodological errors allegedly made by them in the determination of the cadastral value of a property. If the relevant Public Valuer admits to a mistake, it will recalculate the cadastral value.

The Bill retains the mandatory pre-trial review of challenges of the cadastral value. However, currently this procedure is only provided for in relation to legal entities and disputes are considered by a panel consisting of representatives of the regional Department of Rosreestr, of the business community and of self-regulatory organisations of appraisers. The Bill provides for the dispute to be examined by Rosreestr without the participation of representatives of the business community and self-regulatory organisations – which will not contribute to the dispute being reviewed objectively.

According to official statistics in 2014-2015, 30% of applications were settled in favour of the applicant at the pre-trial level; and in court – up to 70%. Given that pre-trial challenges under the Bill will be reviewed by state bodies, the number of successful appeals can be expected to decrease.

By excluding self-regulatory organisations and the business community from the cadastral value determination process, the Bill will fundamentally change the approach in this field. In turn, this will entail the risk of an increase in the cadastral value of immovable property and therefore the amount of the property tax to be paid by legal entities and individuals in future.

In light of the possible changes, taxpayers are advised to monitor not only the progress of the Bill, but also the information published on the website of Rosreestr where valuations of immovable property will be published.

CMS Client Alert | Tax | January 2016
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Portrait of Hayk Safaryan
Hayk Safaryan