The Tax Code establishes that owners of real estate must pay tax on this property. But does the landlord always pay a fair amount of tax, and can it be reduced? To answer, you need to understand the mechanism for calculating the amount of tax.
Tax calculation mechanism
Residents of our country pay a tax on real estate to the treasury based on its cadastral value. This indicator determines the state once every 2-5 years. The higher the cost, the higher the tax.
It should be noted that the fiscal rate on property is different in different municipalities. Establishing an accurate tax rate is the prerogative of local authorities. The tax code, the provisions of which are applied throughout Russia, establishes only the upper and lower ranges of such rates.
Bypassing the details, we can say that taxation on real estate (by decision of the municipal deputies) can be: from 0 to 0.3% of the cadastral value of an apartment, house, room, garage or outbuilding. For a number of objects, the tax may be 2% (for example, for housing worth more than 300 million rubles).
The state carries out an assessment of real estate of citizens in large quantities, often overlooking the individual characteristics of each object. The process resembles the calculation of the "average temperature in a hospital", as a result of which the state appraisal of some objects can exceed the market by several times. Those. in this situation, the value derived by the authorities is “torn off” from market realities and is in fact fictitious (inflated), but the tax will be calculated precisely from this “fictitious” value.
But for many, real estate was also bought in a mortgage, which in itself (without any taxes) significantly affects the family budget. We talked in detail about how to prematurely close a mortgage and where to get money for it in the article “How to prematurely close a mortgage”, but today we’ll talk about tax reduction.
The decision to conduct the assessment is made by the regional authorities. The cadastral value is determined by a specialized budget institution established under the constituent entity of the Russian Federation. For example, in the Moscow region, such authority is vested in the State Budgetary Institution “Center for Cadastral Assessment”. Previously, the above procedure was carried out by private organizations that won the tender for the provision of these services for government agencies.
This raises the logical question - how to reduce the property tax on individuals?
How to reduce property tax
In order to reduce the property tax on individuals, several scenarios can be implemented. First you need to understand if you are entitled to any tax benefits. For example, the laws of the Russian Federation directly establish tax incentives for retirees. Naturally, these are not the only categories of citizens who are exempted from paying property fees, so do not be lazy and study the full lists of beneficiaries, perhaps you are among them.
In this article, we will not dwell on the topic of benefits in the field of property taxation. Here we will consider a slightly different option, which may suit a wide category of our fellow citizens who do not have official benefits.
So. In order to reduce property tax, it is necessary to prove that the administrative authorities incorrectly calculated the value of your property. It is necessary to justify that the cadastral valuation is overestimated in comparison with the real value.
You can find out the cadastral valuation of your real estate on the official website of Rosreestr or the Federal Tax Service, using electronic services. On the website of Rosreestr, for example, such a service is called “Obtaining information from the state cadastral valuation data fund” . For information, you will need to “drive in” the cadastral number of your object, and then click on the “Find” button, as indicated in the photo below.
Incorrect state appraisal of real estate does occur very often. The appraisers, without delving into the details, considered that your object is, for example, 1 000 000 rubles. Those. They calculated the very “average temperature in a hospital (by municipality or region)”. But really, more than 500 thousand people will never buy your object, such is its market price.
Very often there are situations when the value of real estate is overstated, not even due to incorrect economic calculations, but as a result of direct technical errors! For example, an incorrect measurement of the area or generally some ridiculous typos in the documents. From technical documentation, the error "goes" to the tax authorities and off and on ... As a result, the person receives a notification where the amount of tax does not correlate with the property that he owns.
What is the cadastral value
For a house, apartment, room, garage, parking place, a single immovable complex and some other real estate objects are individuals - the owners of these objects must pay property tax for individuals. As a general rule, tax is calculated as a percentage of the cadastral value of the property. The higher the cadastral value, the higher the tax.
In addition to the cadastral value, the tax base for the tax on property of individuals can be the inventory value. Regions independently choose based on how much tax will be calculated. On the website of the Federal Tax Service of Russia there is a list of constituent entities of the Russian Federation in which the cadastral value of real estate is used to calculate property tax. In other entities, the inventory value is used.
According to the federal law “On Valuation Activities in the Russian Federation”, cadastral value means the value established as a result of the state cadastral valuation. There are several economic methods for determining the cadastral value: the method of comparing sales, the method of capitalization of income, the cost method.
The determination of the tax base on the basis of the cadastral value is also provided for land tax and property tax on organizations.
Challenging the cadastral value
In Russia, the cadastral value of real estate is determined by the mass valuation method, which is carried out by independent appraisers.
Sometimes it turns out that the cadastral value is too high and does not correspond to the market level. This is due to the fact that mass valuation often does not take into account the individual characteristics of the property, and the appraisers themselves do not have complete information about the property.
Information on the cadastral value is publicly available, it can be found in several ways: on the Rosreestr website, in the public cadastral map or in the regional authority of the Rosreestr or in any MFC. Rosreestr collected all the ways to obtain information about the cadastral value of real estate in his letter.
- If the cadastral value was calculated from incorrect characteristics of the real estate, for example, the cadastral value was calculated from the area of the house 300 square meters, but in fact the area of the house is 150 square meters.
- If the cadastral value does not correspond to the market value, for example, the cadastral value of 5 million rubles, but in the market the price of your house is not more than 2 million rubles, and you can prove it.
In this article I will tell you how to challenge the cadastral value on a second basis.
Statement on the revision of the results of determining the cadastral value
The cadastral value can be challenged in court or in a special dispute resolution commission on the results of determining the cadastral value under the administration of the Federal Registration Service for the constituent entity of the Russian Federation. There is no pre-trial appeal procedure, this means that you can immediately go to court. The Rosreestra website has contact information for all such commissions in all regions of Russia.
To dispute the address of the Rosreestr administration in a constituent entity of the Russian Federation, a statement must be prepared on the revision of the results of determining the cadastral value. It must indicate the name, address of the place of residence and the reasons why you think that the cadastral value is too high. The form of such a statement is on the Rosreestr website.
The Rosreestra website states that for the period from January 1 to July 31, 2018, 8,876 disputes about the cadastral value of 17,633 real estate objects were initiated in the courts. At the end of July, the courts examined 4,345 lawsuits, which are 9,109 real estate properties. There was such a picture:
- The claims of the plaintiffs were satisfied in 3,878 claims, this is 8,455 properties.
- For 467 claims, the claims of the plaintiffs are not satisfied, this is 654 real estate.
4,531 lawsuits are pending, this is 5,524 properties.
Attachments to the application
The following documents must be attached to the application for revising the cadastral value:
- Extract from the cadastral value of the property. It can be obtained at the offices of Rosreestr and at the MFC, and also ordered through the Rosreestr website. Such an extract is provided free of charge within three business days.
- A notarized copy of the title deed or title deed to the property. These may be acts of state authorities or local governments, agreements or transactions in respect of real estate, acts, certificates of privatization of premises, certificates of inheritance, judicial acts.
- Report on the assessment of the market value of the property. Based on this particular document, you dispute the cadastral value. Examples can be seen here, here or here.
- A positive expert opinion of a self-regulatory organization (SRO) of appraisers, of which the appraiser is a member, who has drawn up a report, on the compliance of the report on assessing the market value of the appraised property with the requirements of the legislation of the Russian Federation.
You can attach other documents to the application. But this is optional.
Submission of application to the commission
You can send an application using the Russian Post. After you have formed the final package of documents: a signed application in two copies + applications, you need to draw up an inventory of the attachment. This can be done using the service on the website of the Russian Post.
After you have an envelope with all the documents and an inventory of the attachments is formed, go to the nearest post office of Russia. After payment you will be given one copy of the list of attachments with a seal and a signature and a check with a postal identifier by which you can track your letter on the Russian Post website.
Consideration of the application in the commission
Be prepared that your application will be considered by the commission for one month. By law, the secretary of the commission will notify you of the date of consideration of your application no more than 7 working days from the date of receipt of the application, but no later than 5 working days before the meeting of the commission.
You have the right to attend a meeting of the commission.
Based on the results, the commission will equate the cadastral value to the market value or reject your application. Rosreestr’s website also has an example of such a solution.
If you were not present at the meeting, you will be notified within 5 business days from the date of the decision.
Consideration of the application in court
If the decision of the commission does not suit you or you think that this decision is illegal, then you can challenge the decision of the commission in a court of general jurisdiction. Let me remind you that you can appeal to a court immediately, without waiting for a decision of the commission. To do this, you need to apply with an administrative statement of claim to the management of Rosreestr for the subject of the Russian Federation where the property is located.
It is interesting that the decision of the commission can be challenged in court and by the local government in case the commission significantly reduces the cadastral value. This is due to the fact that due to a decrease in the cadastral value, the local budget will receive less income. You need to be prepared for this.
Judicial appeal is the subject of a separate article.
Cadastral value is a legal category that is relevant only for fiscal relations.
Consequences of a change in cadastral value
In accordance with para. 4 p. 2 Article 403 of the Tax Code of the Russian Federation, in the event of a change in the cadastral value, information about the “new” cadastral value is taken into account when determining the tax base starting from the tax period in which you submitted the application. That is, if you filed an application in 2018, and the commission lowered the cadastral value, you can pay the tax on the “new” cadastral value from 2018. This order currently exists.
From 2019, this order will change. In the event of a change in cadastral value, information about the “new” cadastral value will be taken into account when determining the tax base starting from the date of application of the “old” cadastral value.
Thus, if in 2019 the commission reduces the cadastral value of the property, and this value has been applied since 2015, then you should calculate the tax on the "new" cadastral value from 2015.
This means that you have the right to apply for a refund of excessively paid tax. But by law, such a period is limited to 3 years. That is, in 2019, you can only claim tax refunds for 2018, 2017 and 2016.
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What does it depend on?
The calculation of the tax depends on the cadastral value of the property and its category. The payment amount is also calculated taking into account the legal status of the payer. Legal entities pay tax at a higher rate.
For individuals, the Tax Code provides for a number of preferential categories that can be supplemented at the municipal level.
In 2019, for individuals it is:
- 0.1% for residential premises,
- 0.5% for other objects,
- 1.1 - 1.5% for other property.
For legal entities, the rate is 1.1-2.5%. If the tax base is zero, then, accordingly, the property is not subject to payments.
How to reduce property tax?
It is necessary to take care of reducing the cadastral value of the object. In practice, real estate owners are faced with a situation where the value of the property is unreasonably high and significantly different from the market.
There may be cases of incorrect tax calculation by the Federal Tax Service specialists, including incorrect use of coefficients. Then you need to contact the tax office with a statement on the recalculation of payments.
If the applicant is not satisfied with the high cadastral value of the object, then he needs to apply to the special commission of the Rosreestr and try to resolve the issue administratively.
If the commission made a negative decision on the application, you will have to appeal to the court with an administrative statement of claim.
According to ch. 30 of the Tax Code of the Russian Federation movable property that appeared on the balance sheet of a legal entity before 2013 is not taxed. The exception is cases when such property was transferred after the reorganization of the company. In other cases, the tax will have to be paid at the approved rate.
Payments can only be reduced if the initial book value of the assets is not high. A similar opportunity is provided for real estate organizations.
At the local level, various benefits for organizations are possible, including their exemption from payment of property tax.
Typically, such a list includes non-profit organizations engaged in cultural and educational sphere, as well as religious organizations.
Individuals need to achieve a reduction in the cadastral value of property. If it is impossible to do this in a declarative manner, you will need to conduct your own appraisal examination of the object, which is also possible in the framework of the trial.
The conclusions of the examination are crucial, but the court is not connected with the arguments of the expert and investigates the evidence in aggregate.
Individuals can also try to register an object for a preferential category of citizens (with their consent), as well as change the functional purpose of the object - for example, legally use it as an exhibition, a museum and thus receive an exemption from the tax burden.
You can reduce property tax in the following ways:
- reduce the cadastral value of the object,
- re-register it as a preferential category of citizens,
- reduce the tax base - for example, divide property into shares,
- change the functional purpose of the object,
- change the status of the organization (in some cases).
It is necessary to act taking into account the peculiarities of local tax legislation, including the ability to take advantage of specific benefits.
Who are the benefits?
The following categories of citizens have the right to take advantage of:
- senior citizens
- disabled people 1, 2 groups,
- military - participants in hostilities,
- Heroes of Russia, the USSR, full gentlemen of the Order of Glory,
- family members of dead soldiers
- liquidators of the Chernobyl accident and other technological disasters.
How to reduce the property tax of legal entities - you need to consider the status of the organization, as well as the value of the object. Желательно, чтобы она изначально была невысокой. В качестве льготные категорий юридических лиц законодатель на федеральном уровне предусматривает религиозные организации, некоммерческие организации, занятые в культурно-просветительской деятельности.
Minor property owners pay full tax. For them, parents or other legal representatives must do this.
At the regional level, benefits are available for minors. So, in the Moscow Region, the tax on property tax is exempted by the minor owner of the property if he is brought up in a large family.
Do I need to pay property tax on a leasing car? Information is here.
Are there any exemptions from corporate property tax? Details in this article.
Benefit can be obtained only for one category of the object. For example, if a disabled person of group 2 has two apartments, then he is exempted from paying tax for only one apartment and usually with a higher cadastral value.
You must declare your eligibility. Otherwise, the tax will be charged in full. In difficult situations, especially if it is necessary in litigation, it is advisable to get the support of a competent lawyer.
In the video about the amount of property tax
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Where to go?
So, in order to reduce the property tax of individuals, it is necessary to achieve an official reduction in its cadastral valuation. The specified decision is entitled to be taken either by Rosreestr or a court. A citizen has the right to apply to any of these instances. However, we recommend that you do not immediately resort to a lawsuit.
To begin with, it is advisable to contact a special commission at the Federal Registration Service for your region. Statistics show that this body often makes decisions in favor of citizens. Almost every second application is viewed positively.
To apply to the commission, it will be necessary to prepare an appropriate application and a certain set of documents. You may need documents on the ownership of real estate, a report by an independent appraiser on the real value of your property (or a document confirming the existence of direct technical and other errors made in the cadastral valuation process). You can check the list of all necessary documents and the procedure procedure on the Rosreestr website or in its reference services without any problems.
The difference in state and independent assessment must be established at the time of the assessment. That is, if the state valuation was determined in January 2019, then it needs to be compared with the market value for January 2019.
The revaluation application is considered within a month. In case of a positive decision, the tax amount will be reduced not only for future tax periods, but also for the time that the tax was transferred based on an overvaluation. However, there are certain restrictions in this case - no more than three years.
It should be noted that real estate tax reduction is not the only way to save on its maintenance. The most popular way is still the return of personal income tax for the purchase of real estate and for the payment of interest on a mortgage. Namely: each working person has the right to return to himself from the state budget an amount of up to 260 thousand rubles when buying an apartment (house) and up to 390 thousand rubles if the apartment (house) was bought on a mortgage. We described this in more detail in the article “Return Personal Income Tax for the Purchase of Real Estate“.
If you could not lower the property tax through a commission, then you can go to court.
The application is sent to the regional court (or republican, regional, court of the autonomous region or city of federal significance). As a rule, the term for considering cases of this category is three months. A lawsuit is brought against a state body or local government that approved the results of determining the cadastral value.
It is worth noting that if you decide to refuse the lawsuit or the court decides not in your favor, then in the future you will no longer be able to go to court to challenge the state assessment of the value of this real estate property. Repeated appeal to the court will become possible only after a new “wave” of state assessment. As we wrote, this procedure is performed once every 2-5 years.
To reduce property levies, some citizens use other options. For example, re-register an apartment for parents-pensioners or relatives with a disability group. These categories of citizens enjoy tax benefits. However, it is worth remembering that a citizen entitled to receive tax benefits can use it only for one property. That is, if a pensioner already owns some real estate, then for the second and subsequent he will have to pay the full tax.
Also, if the amount of tax seems to you too large, it will not be superfluous to double-check the correctness of calculating its amount in the tax authorities themselves. It happens that tax officers make mistakes, so it may happen that it is after self-recalculation that you will be able to reduce the amount of tax.
We hope that the information in this article will really help you reduce the property tax for individuals.
Note that on our site you can find other useful financial information. In the “Pokrovator” section, you can read a large number of articles on how to save on medicines and travel, how to speed up the receipt of a tax deduction, and many others. Well, in the “ATM” section you can find interest-free loans, debit cards, check your credit history, order an insurance policy and much more!