On 6 October 2014 the Russian President signed into law a bill that allows local authorities to assess, starting from 2015, the property tax rate for individuals based on the cadastral value of their properties (rather than the inventory or the BTI value, as is currently the case). As the cadastral value, albeit lower than the market value by 15-20%, is nevertheless significantly higher than the BTI value, individuals should expect the annual amount of property tax owed to increase at least tenfold.
The Russian authorities continue to implement their policy of increasing tax burdens. At the end of 2013, the State Duma had adopted a new law amending the property tax calculation formula for certain immovable assets of legal entities (please see our article in LCDR No. 246). It is now the turn of individual owners to be targeted by this policy, and to an even greater extent than the entities themselves.
Indeed, the range of real estate concerned is quite wide: houses, flats, rooms, garages, parking spaces, constructions in progress and more. In contrast, plots of land do not fall within the scope of the new rules since they are subject to land tax.
The tax rates will vary depending on the type of property and their location. For example, the new rules set the rate of personal property tax in respect of residential premises at a maximum amount of 0.1% of the cadastral value, save for those premises whose value exceeds 300 million roubles, in which case a 2% rate will apply. However, local authorities will have a free hand in setting either lower (down to zero) rates or higher ones, but they will not be able to raise the standard maximum amount by more than three times.
Local authorities have until 1 January 2020 to implement the new parameters for the determination of the tax base. If after this deadline they have still not done so, the personal property tax will continue to be assessed according to the BTI value of the properties.
The Moscow authorities have wasted no time in following the federal legislator’s lead. At a Moscow Government meeting held on 13 October 2014, a new procedure for calculating personal property tax based on the cadastral value was approved. As a result of these changes, the Department for Economic Policy and Development of Moscow expects to fill the city's coffers with an additional 3.5 billion roubles in 2016.