Below we address some of the most common questions and concerns on tax issues related to real estate. These are only general comments. Please contact us to discuss your situation in detail and get qualified advice.
Do I have to pay taxes when buying real estate in Moscow?
Are any real estate purchase expenses tax deductible?
How much can I deduct from my taxable income?
How can I get tax deduction?
Do I have to pay taxes when selling real estate in Moscow?
I am the resident of Russian Federation. What tax deduction at sale can I claim?
I am a non-resident but I have owned my apartment for more than 10 years already. Can I expect any tax deductions?
Do I have to pay taxes when buying real estate in Moscow?
There is no tax on real estate purchase in Russia for the buyer. Property taxes, which real estate owners have to pay annually, are currently assesed on property's nominal value and are very low. At purchase, however, it's important to consider taxation on future sale and other relevant tax and legal issues, such as implications of Marital Code other relevant legislation. Evans professionals will be happy to provide you with qualified advice on the real estate taxation, discuss the Russian Marital Code and and other important issues, which should be considered purchasing a property.
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Are any real estate purchase expenses tax deductible?
If you are a Russian tax resident, you can claim a tax credit for a number of expenses listed below. Unfortunately, the maximum amount allowed for the tax credit is not very large.
Tax deductible expenses include:
- Cost of architectural plans and construction paperwork
- Cost of materials for construction and fit out
- Cost of works on construction and related services
- Expenses on buying an apartment, a house or unfinished property
- Expenses on network connection for the electricity, water, sewage and gas supply (or creation of independent energy sources)
Expenses on construction and fit out are tax deductible if acquisition paperwork states that the property is unfinished.
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How much can I deduct from my taxable income?
The total tax credit can not exceed 2,000,000 rubles for the properties acquired after January 1, 2008. For the properties acquired before January 1, 2008, the tax credit is capped at 1,000,000 rubles of your taxable income. You can claim the tax credit within 3 years of the property purchase.
If you financed your purchase with a mortgage loan, the interest on your loan is fully tax deductible.
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How can I get tax deduction?
There are to ways to apply for the tax deduction when buying real estate:
- With the local tax authority, determined by your residence address. In this case you will receive actual refund to your bank account.
- With your employer. In this case your employer will stop withholding the income tax in the amount of the deduction.
You can claim the tax credit only once irrespective of the number of real estate purchases you made.
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Do I have to pay taxes when selling real estate in Moscow?
The Seller of real estate must pay income tax on difference between the price of purchase and the selling price.
Tax rate for the residents (those who stay on the territory of Russian Federation for more than 183 days a year) is 13%. Also there are considerable tax deductions for the residents.
For the non-residents tax rate is 30% and the full sale proceeds are taxed, the original purchase price or any expenses can't be deducted.
If you live abroad you might benefit from the Dual Taxation Agreements, which Russia has sign with many countries. Some tax in the country of your residence might aslo be due. Please consult an accountant or a tax adviser regarding situation in the country of your residence.
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I am the resident of Russian Federation. What tax deduction at sale can I claim?
If you own real estate for more than 3 years, all profit from the property sale is tax exempt.
If you own real estate for less than 3 years, the value of tax credit at sale is 1,000,000 rubles (approximately $35,000 at today's exchange rate).
Instead of claiming the tax credit, you can pay the tax on difference between the sale price and the acquisition price. Some other expenses can offset the profit as well.
You will have to choose whether to claim the tax credit (and pay 13% of sale proceeds minus 1,000,000 rubles) or pay 13% on the profit. Usually, tax credit is useful if the property has no cost base - was received as a gift, inherited or privatized.
If you are selling other type of property (for example, non-residential premises), which you owned for less than 3 years, the value of tax credit is 125,000 rubles.
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I am a non-resident but I have owned my apartment for more than 10 years already. Can I expect any tax deductions?
Unfortunately, non-residents are not eligible for any tax deductions including using the property cost base. Irrespective of the length of your ownership, you will owe 30% of sale price, declared in the sale purchase agreement. If you have owned the property for over 3 years and your lifestyle allows for it, you might consider spending 183 days in Russia to gain the tax-resident status. Simple presence in the country for the total of 183 days within past year qualifies the seller for the tax resident status. If you owned a property for a long time and currently live abroad please call our office to discuss your options.
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Please see more FAQs on purchase here.
Please see more FAQs on sale here.
