Calculation of property tax on the basis of cadastral value
Federal Law No. 307-FZ on Amendments to Article 12 of Part I and Chapter 30 of Part II of the Russian Federation Tax Code of November 2, 2013
This Law, which provides for the corporate property tax on certain real estate to be calculated on the basis of cadastral value, has entered into force.
The amendments to the Russian Federation Tax Code establish a new procedure for calculating corporate property tax, in particular with respect to shopping centers, office buildings, personal services premises, and also the immovable property of foreign organizations that do not carry out activities in the Russian Federation through a permanent establishment.
The property tax was previously calculated on the basis of the average annual residual book value of the property. Although tax rates will be reduced (see below) compared to the previously applicable 2.2% rate, in most cases the tax base will be significantly higher (for many shopping centers and office buildings the cadastral value may be multiples of the balance sheet value).
The Law establishes maximum rates of property tax calculated on the basis of cadastral value for Moscow, and for all other regions:
For Moscow in 2014 – 1.5 percent of cadastral value, 2015 – 1.7 percent, and from 2016 – 2 percent;
For other RF regions in 2014 – 1.0 percent of cadastral value, in 2015 – 1.5 percent, and from 2016 – 2 percent.
The rate of property tax in each region will be established by regional laws, which are to be adopted to implement the new rules for property tax based on cadastral value in each region, provided that a cadastral valuation of such property has been carried out in the region. The appropriate laws have already been adopted in Moscow, Moscow Oblast, the Republic of Karelia, and the Amur, Kemerovo, and Kurgan Oblasts.
Law of the City of Moscow No. 63 on Amendments to the Law of the City of Moscow on the Tax on the Property of Organizations of November 5, 2003 of November
20, 2013 introduces the following rates of property tax in the city of Moscow:
2014 – 0.9 percent
2015 – 1.2 percent
2016 – 1.5 percent
2017 – 1.8 percent
2018 – 2.0 percent
Moscow has therefore applied lower rates than those permitted by Law No. 307-FZ. A number of other regions have acted similarly.
Single immovable complex Federal Law No. 142-FZ on Amendments to Subsection 3 of Section 1, Part I of the RF Civil Code
of July 2, 2013
A new form of immovable thing has been introduced – the single immovable complex (new article 133.1 Russian Federation Civil Code). The term refers to the entirety of a building, structures and other things that are physically or technologically inseparable and united by a common purpose, including linear facilities (railways, power lines, pipelines, etc.), or situated on a single land plot, and for which the title to such items together has been registered in the EGRP as a single immovable thing.
The single immovable complex is treated as an immovable thing circulated as a single property, and is subject to the rules on indivisible things.
Basis and procedure for terminating rights to a land plot
Federal Law No. 123-FZ on Amendments to the Russian Federation Land Code and Article 3 of the Federal Law on the Enactment of the Russian Federation Land Code of June 7, 2013
These amendments concern the compulsory termination through court proceedings of rights to a land plot in the event of improper use. The rights affected are perpetual (unlimited) use, heritable life tenancy, and lease rights.
Improper use of a land plot means:
Use of a land plot in gross breach of the rules on effective land use, including if the land plot is used contrary to its designated purpose;
failure to comply with recultivation, improvement and soil conservation obligations;
failure to comply with obligations to bring land into a condition suitable for use according to its designated purpose;
failure to use a land plot intended for agricultural use, housing or other construction for such purpose within three years, unless federal law establishes a longer period.
Systematic failure to pay land tax is no longer grounds for seizure of a land plot. An instruction to cure the breach must be issued in all cases before seizure of a land plot.
registration of immovable property rights
Federal Law No. 250-FZ on the Amendment of Certain Legislative Acts of the Russian Federation Concerning the State Registration of Rights and the State Cadastral Registration of Immovable Property of July 23, 2013
The procedure for state registration of immovable property rights, and cadastral registration of properties, has been revised, in particular:
The processing period for cadastral registration has been reduced from 20 to 18 calendar days;
The EGRP can be maintained electronically;
The document submission procedure for registration has been simplified – documents may be submitted online (subject to use of a specially qualified electronic signature);
It is no longer necessary to enclose a receipt for payment of the state duty if information that it has been paid is in the state information system on state and municipal payments;
The procedure for registration of new properties has been simplified – a specific list of the documents to be submitted has been determined;
The definition of technical error has been revised;
Certain cadastral procedures, the information in
the state cadastral register, and the requirements for document submissions have been clarified;
The Consolidated State Register of Real Estate is to be maintained on the basis of the EGRP and the real estatecadaster.
Classification of hazardous industrial facilities
Federal Law No. 22-F on Amendments to the Federal Law on the Industrial Safety of Hazardous Industrial Facilities and Certain Legislative Acts of the Russian Federation, and on the Rescinding of Subclause
114 of Clause 1 of Article 333.33, Part II of the Russian Federation Tax Code of March 4, 2013
A classification of hazardous industrial facilities (HIF) has been introduced on the basis of risk of accidents and the potential scale of the consequences. The hazard class is assigned to the HIF upon registration in the state register.
All HIF are divided into four classes:
Extreme hazard (Class I) – continual state oversight, scheduled inspections not more than once per year;
High hazard (Class II) – scheduled inspections not more than once per year;
Medium hazard (Class III) – scheduled inspections not more than once per three years; Low hazard (Class IV) – no scheduled inspections. Organizations operating class I and II HIF must create
an industrial safety management system and ensure it
Rules are introduced on the “HIF safety justification”, which is a document containing information on the accident risk assessment for the facility, associated threats, safe operating conditions for the HIF, and operating, capital repairs, shut down, and liquidation requirements.
Hazardous industrial facilities registered before the entry into force of the law should have undergone re-registration with the assignment of a hazard class by January 1, 2014.
Moscow enlargement Supreme Arbitration Court of the Russian Federation (“RF SAC”) Plenum Ruling of January 25, 2013 No. 13
on Addenda to the Russian Federation Supreme
Arbitration Court Plenum Ruling of November 17, 2011 No. 73 on Certain Matters Concerning Practice in Application of the Russian Federation Civil Code Rules on Lease Agreements
The Plenum of the SAC has issued a Ruling adding to the previously issued RF SAC Plenum Ruling of November
17, 2011 No. 73 and clarifying a number of controversial questions relating to lease relations, in particular:
It states that the law does not prohibit the lease of a future thing (the thing need not be owned by the lessor at the time the agreement is concluded, but must be owned at the time of delivery to the lessee) and it is also permitted to lease property to which the lessor has not yet registered its title;
The conclusion of lease agreements for parts of things is permitted, such agreements should not be deemed unconcluded or invalid; lease agreements for parts
of things concluded for a period of a year or more are subject to state registration, with an encumbrance created over the entire immovable thing;
Parties to a lease agreement that have not duly identified the leased thing but actually perform the conditions
of the agreement do not have the right to claim it was not concluded or is invalid;
The mere absence of a commissioning permit does not prevent the lease of a property; the permit may be obtained later. However, the use of a property that has not been commissioned may be subject to administrative penalties.
On December 25, 2013, the RF SAC Plenum issued Ruling No. 98 on Addenda to the Russian Federation Supreme Arbitration Court Plenum Ruling No. 73 of November 17, 2011 on Certain Matters Concerning the Application of the Rules of the Russian Federation Civil Code on Lease Agreements, in which the RF SAC stated that lease agreements for immovable property concluded March 2 and 3, 2013 are valid (rent must be paid, and penalties established by the lease agreement may be levied), however, the parties to such agreements shall not have rights under such unregistered agreements that may be opposed to third parties. In particular, a tenant shall not have a preferential right to renew the lease for a new term, and lease rights will not be retained in the event of a transfer of title to the immovable property.
RF SAC Presidium Rulings on the allocation of land plots under the prior site approval procedure
RF SAC Presidium Ruling of June 18, 2013 No. 727/13 in case No. A12-3669/2012
“If a land plot requested for construction with prior approval as the site of properties is situated in two territorial zones, then it cannot be formed and this is sufficient ground for denying the selection and allocation of the land plot.”
In accordance with the RF Land Code1 a person interested in the allocation of a land plot for construction may apply to the local authorities with its choice of land plot, and the local authorities must secure such choice by determining the options for placement of the property.
The interested person may request a land plot falling into different territorial zones. The RF SAC has taken the position that the local authorities have the right to deny the selection and allocation of a land plot if it falls within two territorial zones, that is, it cannot be formed as a land plot.
1 Art. 31 RF Land Code.
RF SAC Presidium Ruling of July 2, 2013 No. 1633/13
The RF SAC stated that if land use and development rules have been approved for a town or village, including town-planning rules, as well as land use plans and territorial boundaries for the planning structure, then land plots shall not be allocated using the prior site approval procedure. Such land plots are to be allocated without prior approval as the site of a property, solely by auction and only for construction of the property envisaged in the land use plans and boundaries. Thus, if a town has adopted land use and development rules, land use plans and territorial boundaries, auctions must be held for publically owned land in the town.
Identification of immovable things
RF SAC Presidium Ruling of June 4, 2013 No. 18221/12 in case No. A68-2003/12
“The requirement for identification of a future immovable thing cannot be deemed unperformed if the parties have agreed the conditions for determining such identification.”
The RF SAC has taken the position that the requirement for identifying an as yet non-existent immovable thing cannot be deemed not met if the parties have agreed conditions on which the identification can be made in the future at the time the obligation is performed.
Even if the agreement does not duly identify the property, this defect may be cured upon the parties completing action relating to the performance of the agreement. Provided the performance is accepted by the other party, for example, by signing a transfer and acceptance certificate containing the requisite description of
the property, the conditions of the agreement shall be deemed agreed, and the agreement concluded.
RF Government Resolution of July 29, 2013
No. 1336-r on Approval of the Action Plan (“Road Map”) “Improvements to Legal Regulation of Town-planning Activities and Improvements in the Business Climate in the Construction Sector”
A road map has been approved for improvements in legislation on town-planning activities and the creation of favorable business conditions.
The road map proposes:
Simplification of the process of organizing construction, from the town-planning documentation stage through to commissioning and title registration;
Simplification of the town-planning preparation of land, as well as faster and less expensive procedures for the implementation of investment projects.
Performance criteria are introduced:
Doing Business rating position for “Dealing with construction permits” (number of procedures necessary for obtaining a construction permit, total time needed to complete such procedures, cost of obtaining construction permit);
Assessment of the performance of the heads of the Regions Ministry and Gosstroy in improving the business climate.
Development and approval of town-planning and development rules for all urban districts and towns;
Granting citizens and legal entities the right to take part in territorial planning procedures;
Reduction in the administrative procedures for allocation of land plots for construction; reduction in the number of violations by state authorities exercising their powers;
Increase in the volume of construction through bringing unused land plots into circulation;
Increase in quality and reduction in cost of engineering surveys;
Reduction in typical design and construction times.
RF SAC Presidium Ruling No. 17085/12 of May 28, 2013 in case No. A32-29673/2011
The RF SAC considered a dispute involving a challenge of the state registration of a tenant’s title to immovable properties erected by the tenant on a land plot, and reached the following conclusions:
If the tenant has registered title to leased property in the EGRP against the will of the landlord, then such registration does not deprive the landlord of the right to defend the infringed title;
A stadium should be treated as a single sports facility (single property) comprising a land plot with the appropriate buildings thereon, and the ancillary facilities combined by functional purpose;
The mere fact of the state registration of title to ancillary facilities to third parties is detrimental to the interests of the land plot owner, and therefore the court has the right to qualify such facilities differently and not to apply the rules on immovable things to the relations of the parties;
If the land plot lease agreement does not state that the title to buildings renovated or erected by the tenant arises to the tenant, the tenant does not have the right to apply for state registration of title to the properties it may build or renovate, however, it may claim reimbursement of the cost of construction/renovation, and/or the value of inseparable improvements to the leased property, unless otherwise provided by agreement;
The mere fact that immovable property standing on the leased land plot at the time it was transferred to the tenant was not registered to the landlord (the owner
of the land plot), does not mean that such properties do not belong to the landlord, since buildings and structures erected by the landlord on its land plot and the rights to which have not been registered in the EGRP are an integral part of the land plot.