The Finance Ministry on excluding VAT from cadastral value

The Ministry of Finance of the Russian Federation published Letter No. 03-05-05-01/2300 of 18 January 2018, setting out its view, the third in succession, on excluding VAT from cadastral value when corporate property tax is calculated and paid.

In the letter the Ministry of Finance took the following position: a taxpayer cannot reduce the property-tax base, because, for the calculation of corporate property tax, the Tax Code does not expressly provide that the cadastral value of a property is reduced by the amount of VAT.

Earlier, by Letter No. BS-4-21/21650 of 26 October 2017, the Ministry of Finance confirmed that the amount of value added tax had to be excluded when corporate property tax was calculated and paid.

A CG expert view

Owners of immovable property should note that letters of the Ministry of Finance of the Russian Federation are not regulatory acts and, as practice shows, often mislead taxpayers.

From the moment Consul Group opened this dispute, the position of the Ministry of Finance, and of the Federal Tax Service Directorate for the city of Moscow, shifted in proportion to the number of applications coming in from taxpayers. The volume of applications, prompted in part by the first letter (in which the Ministry told the tax authority that the overpayment had to be refunded), changed the approach to the question both at the Federal Tax Service and at the Ministry of Finance.

In building the practice of excluding VAT from cadastral value, we expected to meet strong administrative pressure. On our calculations, from 2014 the Government of Moscow, because the legislation had not been fully worked out, collected an extra 40 billion rubles from taxpayers. The position of the Federal Tax Service and of the Ministry of Finance is now entirely predictable: a very large sum is at stake, and it has to be returned to taxpayers. Nobody wants to take responsibility for the correct and lawful decision, so in the near term taxpayers will not be able to get their money back without difficulty,

said the managing partner of Consul Group, Sergei Pivovarchik.

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