Introduction of Property Tax Postponed Until 2015

(Moscow Times – themoscowtimes.com – October 21, 2013) The introduction of the widely discussed new real estate tax that is set to replace the old system of levying fees on property with a market-oriented approach will not take place until 2015, a news report said.

The bill was submitted to the government in August, but needs to be revised and submitted again by Nov. 15, one of the participants of a meeting chaired last week by First Deputy Prime Minister Igor Shuvalov said, Vedomosti reported.

President Vladimir Putin said earlier this year, that the new tax could be levied as early as 2014, but this now looks unlikely to happen due to quarreling inside the government.

The provision of tax deductions for privileged categories became the stumbling block for the bill, which has been criticized by sections of the government.

Rather than being tied to the inventory price of property, the new real estate tax that the Finance Ministry has initiated is to be calculated according to the cadaster value, which is a more market-oriented approach.

The Finance Ministry’s proposal would allow the regions to set their own tax rates within given parameters. Taxes on residential buildings could be set at no more than 0.1 percent of their cadastral value, taxes on nonresidential buildings at up to 0.5 percent, and taxes on properties worth more than 300 million rubles ($9.3 million) at up to 1 percent.

The current rate is 2 percent of the inventory property value.

Introducing the new system will increase property tax collectability by 5.6 times, to 137 billion rubles, the Federal Tax Service said.

The initial bill proposed by the Finance Ministry entitled everyone a 20-square-meter tax volume deduction from every apartment or house they owned. Privileged residents, pensioners, the disabled, World War II veterans and other categories, received a bigger deduction ­ 30 square meters from residential property and 1,000 square meters from land. That deduction could only be claimed for one piece of property and land, however.

Currently, those entitled to privileges do not pay real estate tax no matter how much property they own.

The president’s administration said that there should be more tax deductions and that privileged residents should not pay the tax at all. The Finance Ministry, on the contrary, thinks that the existing deductions are “radical,” an unidentified ministry official said.