Press centre News

On March 27, 2015, the Academy of Real Estate training center and Russian Guild of Property Managers and Developers organized a workshop on Property Tax: how to contest the cadastral value of commercial property, with support from the VEGAS LEX law firm and the Nai Becar real estate company.

In 2015, commercial property owners in Moscow faced an increase in their overall tax burden, as the minimum cadastral value of commercial property went up, the property tax was hiked, and the list of facilities to be taxed based on their cadastral value was expanded. The participants discussed the key price-affecting factors used in property valuation; the pretrial litigation procedure; disputed issues in estimating the taxation base for property; the specifics of dispute resolution process in and out of court depending on the type of property owner and other issues.

Igor Chumachenko, VEGAS LEX Partner, Head of Real Estate, Land & Construction Practice, said that the number of disputes over the cadastral valuation of buildings and land plots is growing. At the same time, the Commission of the Federal Service for State Registration, Cadastre and Cartography (Rosreestr) has been rejecting more applications from property owners that contest the cadastral valuation results, which means more and more companies go to court. In the past, commercial courts handled these disputes; starting from August 2014, these claims were handed over to regular courts (the Moscow City Court in Moscow and the Moscow Region Court in the Moscow Region). According to Mr. Chumachenko, what should be contested in these cases is not the rejection itself, but the cadastral valuation result that put the cadastral value equivalent to the market value of the property in question, based on the valuator’s report. After discussing in minute detail the specifics of such disputes in judicial practice, the speaker noted that regular court practice of handling such disputes is still far from fully established, so for the moment, it is highly important to understand the Supreme Court’s policy (an explanatory letter from the Supreme Court is currently in the works) and to take into account the best practices formerly used at commercial courts for the Client’s ultimate benefit. Some of the rulings recently passed by the Moscow City Court and some Supreme Court orders offer hope for this kind of continuity, he said.

Yury Ivanov, project manager at the VEGAS LEX Tax Practice, spoke about the criteria on which land or facilities can qualify as corporate properties taxed based on their cadastral value; how the official list of such properties is legally binding; and about the emerging court practices. The inclusion on the official list is absolute grounds for a corporate property to be taxed based on its cadastral value. However, there is a large arsenal of methods taxpayers could use to take their property off that list. Moreover, in some cases properties can be exempted from tax altogether even while remaining on that list. The expert also spoke about the taxation system for the utilities systems inside buildings, about capital investments in leased facilities, and the periods of taxation that take into account changes in the property’s cadastral value.

The workshop participants included Russia’s leading companies such as Rosneft, MTS, PPF Real Estate Russia, UMA Capital, BasEl Real Estate, BEL Develolpment, MosNovoStroi, Titan Development and others.

***

For more information on VEGAS LEX’s services on the development market, please go here.

For more information on VEGAS LEX’s tax law services, please go here.