Back to EU Member states Russia Contents 1.Introduction – why buy real estate? 2.Contact details 3.Forms of property ownership 4.Taxes and other costs on property acquisitions 5.Issues during Ownership 6.Disposal of property 7.Non resident owners of property 8.Sundry issues

Back to EU Member states Introduction - Russia 1. Introduction - Russia Russian market remains one of the very growing in the world. Volume of retail property, office real estate and warehousing property is about 100 billion $. There is considerable lack of hotels, especially in Moscow and St.-Petersburg. Market average income level of retail, office and warehousing property investments is over 8% in Moscow region, and about 12% in other regions of Russian Federation.

Back to EU Member states 2. Contact details: 3, bld. 1, Krivokolenny side-street, Moscow, Russia Tel.: + 7 (495) , Fax: +7 (495)

Back to EU Member states 3. Forms of property ownership ownership leasehold

Back to EU Member states 4. Taxes and other costs on property acquisition 4.1. Stamp duty for the registration of the rights on property, contracts on property acquisition: private persons – 500 RUR (~ 11 €) businesses – RUR (~ 170 €)

Back to EU Member states 4. Taxes and other costs on property acquisition 4.2. VAT VAT payers have the right to reduce the total amount of VAT by tax deductions (amounts of tax paid when purchasing or renting property to carry out operations recognized as items of taxation).

Back to EU Member states 4. Taxes and other costs on property acquisition 4.3. Corporate profit tax Value of the property (except land) with the term of beneficial use over 12 months and with the initial cost thereof over 20,000 RUR is amortised by imposing depreciation charges. 10% (not exceeding 30% for fixed asset items Taxpayer is entitled to include into the expenses as a lump sum (so called the depreciation premium) expenses incurred as investment in an amount not exceeding 10% (not exceeding 30% for fixed asset items with the term of beneficial use 3-30 years) of the initial value of the fixed asset items and/or expenses incurred in the event of an additional construction, additional equipping, reconstructing, upgrading, technical refurbishing, or a partial liquidation of fixed asset items. Rent expenses can also be an outlay.

Back to EU Member states 4. Taxes and other costs on property acquisition 4.4. Personal income tax Taxpayer is entitled to the property tax deductions in the amount spent by a taxpayer for a new construction or acquiring on the territory of the Russian Federation an apartment house, flat, room or a share (shares) in them in the amount of his actual expenses, and also in the amount used to repay interest on the purposive loans (credits) received from credit and other organizations of the Russian Federation and actually spent by him on the new construction or on the purchase of an apartment house, flat, room or a share (shares) in them on the territory of the Russian Federation. The total amount of property tax deduction may not exceed 2,000,000 RUR (~ €).

Back to EU Member states 5. Issues during ownership Land: Owners pay land tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 1,5% of the cadastral value of land). Tenants pay rent. Other property: Owners pay corporate property tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 2,2% of the value of property) or personal property tax (local tax, tax rates are established by municipal bodies, maximum tax rate is 2% of the value of property). Tenants pay rent.

Back to EU Member states 6. Disposal of property 6.1. VAT Sale of property and lease services is VAT taxable. Tax rate is 18%. Exempt from taxation: letting out premises by a lessor on the territory of the Russian Federation to foreign subjects or to organizations accredited in the Russian Federation when by law of a corresponding foreign state a similar procedure is established concerning citizens of the Russian Federation and Russian organizations accredited in this foreign state (Australia, Austria, Belgium, Brazil, Canada, China, Croatia, Czech Republic, Germany, Great Britain, Greece, Denmark, Iceland, India, Ireland, Korea, Netherlands, Norway, UAE, Poland, Portugal, USA, Finland, France, Switzerland, Sweden, Japan, etc.).

Back to EU Member states 6. Disposal of property 6.2. Corporate profit tax Profit received from sale of property and lease services are taxable. Tax rate is 20%.

Back to EU Member states 6. Disposal of property 6.3. Personal income tax Income received from sale of property and lease services are taxable. Tax rate is 13% for residents and 30% for non-residents. Incomes received by donation are relieved from taxation if the donor and the donee are members of the family and/or close relatives (spouses, parents and children, including adoptive parents and adopted children, grandfather, grandmother and grandchildren, fully natural or partially natural (having a common father or mother) brothers and sisters). The taxpayer is entitled to the property tax deductions in the amounts received by the taxpayer over a tax period from the sale of apartment houses, flats, rooms including privatized residential premises, summer cottages, garden houses or land plots, including shares in the said property which have been owned by the taxpayer for less than three years, but in general not more than 1,000,000 RUR (~ €), and also in the amount received in a tax period from the sale of other property owned by the taxpayer for less than three years, but not more than RUR (~ €). When selling the said property which have been owned by the taxpayer for three years or more the property tax deduction shall be granted in the full amount. Instead of exercising his right to the property tax deduction the taxpayer shall have the right to reduce the sum of his taxable incomes by the amount of his actual expenses, proved by documents that are involved in the receipt of these incomes, except for sale by the taxpayer of securities owned by him.

Back to EU Member states 7. Non resident owners of property Non-residents pay taxes on tax rates mentioned above.

Back to EU Member states 8. Sundry issues 8.1. Proof of property rights The state registration is mandatory for (1) rights of ownership and other rights in rem to real property (acquisition, conveyance, termination of the rights), (2) all encumbrances of such rights, (3) all transactions with real property. However, if the term of lease is less than one year, such transaction does not require state registration. The rights and transactions are recorded in the Unified State Register. State registration of the rights to real property is confirmed by the certificates while the state registration of transactions is confirmed by special “registration inscription” on the relevant documents.

Back to EU Member states 8. Sundry issues 8.2. Building law Building law consits of the Building Code, other federal and territorial laws and normative acts of Russian Federation. The building permit certifies the right to build, reconstruct and make capital repair of the bulding.

Back to EU Member states 8. Sundry issues 8.3. Mortgage The Mortgage Law significantly improves the potential of mortgages as an instrument for investments. Buildings and structures can only be mortgaged together with the land plots on which such buildings and structures are located.

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