The Moscow mayor's office has agreed to restrain the pace at which property tax rises: in 2019 it may go from 1.5% to 1.6% instead of the planned 2%. That will allow the owners of shopping centres and offices to save tens of millions of roubles on a property, and almost 33 billion roubles on the capital's real estate as a whole.
The Moscow authorities intend to set the property tax rate for 2019 at 1.6%, Alexei Nebolsin, a member of the presidium of the Moscow branch of Opora Russia, told Kommersant.
"The rise in the rate to 2% provided for by the Tax Code will be gradual, by 0.1 of a percentage point a year," says Mr Nebolsin, pleased at the news.
Under the legislation in force, a gradual increase in the property tax rate began at federal level in 2014: first to 1.5%, and by 2016 to 2%. The regions have the right to set the rate within those figures. If the local authorities take no separate decision on the size of the rate, the figure set at federal level by the Tax Code applies to taxation for the next period. The mayor's office could have set property tax at 2% two years ago, but the city authorities raised the rate gradually, from 0.9% in 2014 to 1.5% in the current year.
Deputy Mayor Vladimir Yefimov, who oversees economic policy and the development of the city, confirmed to Kommersant that the rate will be below 2%. "The Moscow government is prepared to meet entrepreneurs halfway and to support them by setting a preferential property tax rate compared with the rate of 2% provided for by federal legislation," the official said. In his words, however, the size of the rate has not yet been approved.
"Options for 2019 and the following periods are now being worked out. The city will form possible scenarios and discuss them with entrepreneurs at the beginning of 2019," Mr Yefimov added.
In his words, in terms of the revenue forgone the city can afford preferential conditions for business: "This is a long-term investment. Transparent conditions for business help it to develop, which in the end has a positive effect on the city's economy."
Entrepreneurs in the capital were concerned that in 2019 their tax costs could rise by more than 30% if the mayor's office did not agree to freeze the rate and raised it to 2%. There were grounds for that concern. The cadastral valuation of Moscow properties, on which property tax is charged, turned out after this year's revaluation to be 10% lower, and in that case it is not in the authorities' interest to reduce the tax burden. In the capital the list of properties for 2018 contains almost 24,000 buildings with a total cadastral value of 8.2 trillion roubles (so a saving of 0.4% may be equivalent to up to 32.8 billion roubles). Following the previous valuation, made in 2016, that sum stood at 9.06 trillion roubles.
Opora Russia warned that, against a rise in VAT to 20% and an unstable economy, an increase in property tax could lead to critical consequences: higher rents, higher prices for goods and services, and a fall in consumption. Everyone engaged in trade could have been in the risk zone, about 40% of all small and medium-sized businesses operating across various industries.
According to Sergei Pivovarchik, managing partner of Consul Group, if the property tax rate is indeed fixed at 1.6%, that will be a genuine surprise for the owners of shopping centres and offices. He gave an example: a company that owns seven business centres in Moscow had budgeted 200 million roubles for property tax for the coming year, allowing for a possible rise in the rate to 2%. A rate of 1.6% would bring the planned sum down to 160 million roubles.
"Because the increase in the tax rate relative to the rate now in force will be only 6.7%," Mr Pivovarchik stressed, noting that the risk of a 2% rate being set earlier than planned does still exist. "Next year," the expert adds, "amendments will be made to the Tax Code that will oblige all constituent entities of the Russian Federation to move to a 2% property tax on cadastral value."
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