The following article is an excerpt from Awara Russian Tax Guide, the first comprehensive book offering a full overview of all Russian taxation laws and rules. Awara Russian Tax Guide provides insight into the general framework of the Russian tax laws, the Tax Code and its principles. It describes the general rules of the Tax Code Part I and each type of tax and tax regime of Tax Code Part II, among them: Profit Tax, VAT, Personal Income Tax, Property Tax, Employer’s Social Contributions. The book also covers the now so important case law and taxation principles set by court precedents.
The land tax is a local tax regulated by Chapter 31 of the Tax Code.
Taxpayers of the land tax are organizations and individuals, who own land or enjoy right of inheritable lifelong possession, or right of permanent (perpetual) use.
Exemptions in form of reduced tax rates are established in relation to some socially protected categories of people such as disabled persons (article 391(5). Some organizations are totally exempt from the land tax. (art.395) among them are residents of special economic zones (for a limited period) and religious organizations. Some additional exemptions to the tax may be set in local regulations (article 387 (2)).
Certain types of land are exempt from the tax, such are:
(i) land on which objects of cultural and historical heritage are located
(ii) land held by defense, security and customs authorities
(iii) land officially recognized as forest
(iv) land under state-owned water basins (with some exceptions)
(v) land which cannot be freely traded or inherited due to restrictions in the law. (In Russian jurisprudence this is referred to as “land withdrawn from civil law circulation”).
The tax base is the cadastral value of the land. This value is determined in accordance with the Russian Land Code (art. 66) and the Law “On state immovable property cadaster” of 24July 2007.
The cadastral value is calculated as a result of either a state cadastral value or an independent land valuation (Land Code Article 66).
In a decision of 2011 the Constitutional Court (N 281-О-О) ruled that for determining the market value of land, the cadastral value is set as a percentage of the market value.
The Supreme Commercial Court (No. 913/11 of 28.06.2011) stated that that if a taxpayer does not agree with the cadastral valuation of the land then the taxpayer may consider initiating an independent evaluation of the land. In that case the cadastral value will be equal to the value of the independent evaluation (an official independent valuation report of the land has to be issued). The court clarified that in the case when cadastral value would be significantly higher than the valuation arrived at by independent appraisal then the cadastral value may indeed be changed. However, the change has to be entered into the cadastral register. Other court practice supports this trend. (For example, Federal Commercial Court in the Volga-Vyatka Region No. А29-9636/2010 of 11.10.2011; Federal Commercial Court in the East-Siberian Region No. А74-300/2011 of 08.09.2011; Federal Commercial Court in the Volga Region No. А55-24797/2010 оf 04.10.2011; Federal Commercial Court in the Ural Federal District No. Ф09-7091/11 of 03.11.2011).
In addition to the cadastral value and market value, there is also the concept of ‘normative value of land.’ This value is determined annual by the relevant regional government and includes considerations as to the quality and location of the land as well as economic payback. The method for determining the normative value has been set by Government decree (No. 319 “On the procedure for determining land normative price” of 15.03.1997).
As noted in ruling N 54 of the Plenum of the Supreme Arbitration Court of Russia, if the cadastral value of a land is not established, then the normative price of a land is applied for tax purposes.
Organizations and individual entrepreneurs have the obligation to calculate the tax base, submit tax returns and pay the taxes on their own initiative, whereas in regards to individuals the tax office must issue a tax assessment note and demand payment.
The tax is paid annually, with quarterly advance payments (articles 393 and 396 of Tax Code).
Maximum rates are established by the Tax Code (article 394). Local authorities may set any rates for different kinds of land within these limits.
A special tax rate of 0.3 % is established for the following types of land (art. 394):
a) Land reserved for agriculture and farming
b) Land granted for the purposes of private subsidiary farming, horticulture, gardening, or live-stock breeding
c) Land for housing and engineering infrastructure for municipal services.
Other land is taxed at the general rate 1.5%.
The Moscow law “On Land Tax” of 24.11.2004 sets out some specific rules. For instance, individuals (except individual entrepreneurs) are not required to make advance payments. It provides a lower rate for lands used for housing (0.1%). Some other exemptions are also provided for, including for land used by governmental and scientific institutions.
The St Petersburg law “On Land Tax” of 23.11.2012 does not require individuals to make any advance payments. The tax rate for agricultural land is 0.3% of cadastral value, while the tax rate for land for housing and residential properties is set at 0,01%; and 0.042% for land for subsistence farming.