As of 1 January 2016, new regulations will apply for taxes on residential sales
On 1 December 2014, the Russian president, Vladimir Putin, signed into law “Amendments to the first and second parts of the Tax Code of the Russian Federation”.
According to the law, beginning on 1 January 2016, the minimum time for the ownership of immovable property, for the purpose of tax forgiveness, will increase from three to five years. At the end of that five-year term, any profit an individual accrues from the sale of property will be exempt from income taxes.
According to the amended law, if the owner sells the property before the five-year period and the proceeds from the sale are less than the cadastral value of the property, multiplied by the reduction factor of 0.7, the law recognizes the taxpayer’s income liability as equal to the cadastral value of the property, multiplied by the reduction factor of 0.7.
After 2016, a three-year holding period to qualify for exemptions from the payment of the personal income tax will remain in force for private property an individual obtains through inheritance or as a gift and for property that, by contract, is necessary for the maintenance of a dependent. The various regions of Russia will be eligible to cancel the time limit for the possession of property.
In accordance with Article 217 of the current Tax Code, a 100 percent discount applies to the personal income tax on profits from the sale of residential property if an individual owns it for more than three years, as long as the value of the property is less than RUB 1 million or its value has fallen below the purchase price.
The government has introduced the amendments to the Tax Code in order to eliminate tax evasion schemes based on claims that the value of a given piece of property is less than the purchase price. In addition, it reduces the attractiveness to speculators who purchase residential property only to sell it after the three-year period, an investment strategy that increases the cost of housing. Those who are interested in such arrangements will have to wait five years to realize their profit.
