The Moscow mayor's office will settle with the retailers

Owners of shopping centres and offices in Moscow will be able to recover 12.5 billion roubles overpaid to the budget in property tax for 2016. The Moscow City Court granted a claim to declare invalid the part of a resolution of the mayor's office which, at the end of 2016, raised the cadastral value of some properties threefold and of others by a factor of 15.

Owners of commercial property in Moscow have secured the setting aside of a resolution of the mayor's office under which they overpaid 12.5 billion roubles to the budget in property tax in 2016. Sergei Pivovarchik, managing partner of Consul Group (who represents the claimants in court), told Kommersant of the corresponding decision of the Moscow City Court on the owners' collective claim. In August the Supreme Court decided to send the case back to the court of first instance for reconsideration. The City Property Department said that it disagreed with the decision of the Moscow City Court.

The occasion for the proceedings was the mayor's office's decision to raise the cadastral valuation of almost 2.5 thousand items of commercial property. At the end of 2016 that decision was fixed in a resolution (No. 937-PP of 26 December 2016). The cadastral value of the properties rose by between three and 15 times, and the amount of property tax rose in proportion. Thus the cadastral valuation of the Evropeisky shopping centre rose from 4.4 billion roubles to 36.3 billion roubles, and the tax from 57 million roubles to 472 million roubles. The Shchuka shopping centre was revalued at 11 billion roubles (it had been 3 billion roubles): the tax rose from 39 million roubles to 139 million roubles. Under the new resolution the valuation of the Romanov Dvor business centre rose from 2.5 billion roubles to 7 billion roubles, and the tax, instead of 32 million roubles, came to 90 million roubles.

According to Sergei Pivovarchik, more than 70% of the owners learned of the changes only during the desk audit that follows payment of the tax (it must be paid by 30 March for the previous year). The owners could not refuse to pay the additionally assessed tax, because taxpayers are obliged to comply with a decision of the tax authorities even where it is unlawful, and only afterwards to challenge it in court. In addition, the owners had to pay the fine prescribed for the arrears. Mr Pivovarchik says that the sanction can be avoided only if the taxpayer discovered the arrears and paid them himself.

The owners had no such opportunity: some did not know of the increase, and others relied on an explanation by the Government of Moscow that the resolution does not affect the amount of the tax,

- Mr Pivovarchik said.

The claimants, whose interests Consul Group represented (31 organisations), paid 130 million roubles in fines. They declined to comment.

It follows from the materials of the case challenging the lawfulness of the resolution that the mayor's office amended the document which had approved the cadastral valuation for 2015-2016.

It may contain a new value for 2015, which may also give rise to arrears,

- Mr Pivovarchik does not rule out.

Alexander Ovesnov, head of the tax disputes practice at MEF-Audit PKF, reports that not every taxpayer who received an additional assessment of property tax applied to the Moscow City Court under the procedure for administrative proceedings. "Some challenged the tax acts on the additional assessment itself," he explains. To have the resolution of the Government of Moscow declared invalid in so far as it extends to 2016, a decision of the judicial collegium of the appellate instance is required as well as the decision of the Moscow City Court. "After that, taxpayers will be able to recover the overpayment of property tax for 2016," Mr Ovesnov explains.

Under the latest changes in the legislation, the maximum rate of property tax from 2016 is 2%. The constituent entities of the Russian Federation set their own rate, without exceeding the ceiling fixed at federal level. In Moscow the rate for this year was set at 1.5%. The mayor's office has not yet approved it for 2019: if it does not do so, the federal rate will apply, and that rate is higher than Moscow's.

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