Critical analysis of the current real estate system in the Russian Federation: legislative framework and enforcement

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Financial University under the Government of Russian Federation

CRITICAL ANALYSIS OF THE CURRENT REAL ESTATE SYSTEM IN THE RUSSIAN FEDERATION: LEGISLATIVE FRAMEWORK AND ENFORCEMENT

Tshibola L.A.M.

Abstract

This article discusses issues related to the real estate system in the Russian Federation, namely: the legal norms on real estate (the Housing Code, various legislative acts and initiatives), the issues of real estate taxation (basic concepts, experience of world practice, and taxes in the Russian Federation).

Keywords: taxation, real estate, cadastral value, legislative regulation, land issue, cadastral system, legal norms.

Introduction

State regulation of the real estate market assumes multifaceted work of all systems of management on a promising basis. The state acts on the real estate market in two roles. It fulfills regulating function. Its task is to form an integral and consistent regulatory framework for regulating the real estate market. There are four meaningful goals the activities of the authorities to regulate the real estate market:

? Using of real estate as an investment resource, and as an incentive to raise funds from institutional and private investors in the economy,

? Increasing of efficiency (including profitability) of real estate using,

? increase of liquidity of real estate in the secondary market,

? The formation of a system of state control of the current economic activity of local governments.

The main legislative base of normative legal acts relating to real estate

1. The Housing Code - the main law.

The Housing Code is the main law regulating relations for making transactions of the deals with housing, as well as other actions that cause a change in rights or using of living accommodation. In addition, the Housing Code regulates the transfer of property from living to non-living and vice versa, as well as the competence of the reconstruction or redevelopment of living quarters [6].

The Housing Code determines the need to ensure the rights of citizens to housing, its security and inviolability, the inadmissibility of arbitrary deprivation. It describes the grounds for the emergence of housing rights and obligations, which include transactions of sales contracts or the registration of inheritance. The Housing Code defines ways to protect housing rights, including litigation in cases of their violation. It also establishes the competence of authorities in the field of housing relations. In particular, it states that state registration of property rights for housing is compulsory.

The Housing Code defines what is a dwelling and housing fund. It describes the conditions and procedure for the withdrawal of the premises from the housing fund. Thus, the transfer of a premise into a non-residential one is impossible, unless it is possible to equip it with separate access, if someone resides in it or is part of a dwelling. An apartment in an apartment building can be withdrawn from the housing fund only if it is located on the ground floor or above non-residential premises [6].

2. Other important legislative acts.

A large impact on the development of the real estate market is provided by the free transfer of property rights of real estate. According to the Civil Code, in carrying out transactions with real estate, their obligatory notarization is required. According to the Law "About Pledge" it is also required that a mortgage agreement must be notarized.

The legislative base of the real estate market continuously develops according to the changing relations in the society. At present, the laws "About mortgage", "About housing-cooperative cooperatives", "About participation in collective building" and others play the important role in the formation of relations in the market.

The law "About mortgage" opened the way for mortgage lending in the territory of Russia. It regulates the relations of banks and borrowers. The laws "About housing cooperative cooperatives" and "About participation in collective building" enable citizens to participate in long-term programs for the construction of new housing. They determine the responsibilities of developers who build new buildings using the capital of property buyers. It should also be noted the law "About privatization", which defines the legal basis for the transfer of housing from state property to private property of citizens.

3. Legislative-legal initiatives of 2009-2012.

The concept of creating a single federal system in the sphere of state registration of real estate rights and state cadastral registration of real estate is approved by the Government of the Russian Federation on June 11, 2009 and approved by Order No. 534 of the Ministry of Economic Development of Russia of December 18, 2009, as well as an action plan ("road map"). The creation of such a system is based on the established positive long-term experience in the functioning of state registration systems for real estate rights and state cadastral registration of real estate, as well as taking into account modern international practices in the development of services in these areas. From 1 January 2017, Federal Law No. 218-FZ of July 13, 2015, "About state registration of real estate" (Law No. 218-FZ), enacts large-scale changes in the sphere of cadastral registration and state registration of rights to immovable property. At the same time, there are some problems in the sphere of cadastral registration and state registration of rights of immovable property [3].

The main principle task of state registration of rights is to ensure genuine publicity and reliability of the register. At the same time, the reliability of the registry is not only h the principle of keeping the register but the quality of the register provided by law.

Very important problem is the difficulty of improving the procedure for conducting state cadastral valuation of real estate, consideration of complaints related to the results of determining the cadastral value. It should be noted that the assessment of real estate for tax purposes, on the one hand, mass (cadastral), on the other - individual (market). This unity is one of the problems that prevent the creation of an optimal and harmonious methodology for its evaluation in the short terms.

The using of federal assessment standards is based on subjective approaches to the selection of criteria for determining the price of land plots, as well as unreliable information about their characteristics, leads to a distortion of the results of the assessment. There are numerous cases when the cadastral price of neighboring plots with the same type of using in one cadastral quarter differs greatly. At the same time, the subjects of the Russian Federation bear significant financial outlay for conducting cadastral estimation.

There are no legislatively fixed norms allowing the executive authorities of the subjects of the Russian Federation, acting as the customer of the state cadastral estimation of land plots, to organize verification of the reliability and objectivity of the assessment results or reject the results of the assessment.

There are numerous facts of exceeding the cadastral value over the market value of land plots. In this connection, appeals of taxpayers have become more frequent both in the Commission for dispute resolution on the results of determining the cadastral cost of land and in courts. There are many cases of non-payment of land tax due to its significant overstatement.

At the same time, the reduction of cadastral price for individual land plots within the boundaries of one quarter, according to the decision of the Commission or the court, leads to non-observance of the principle of "universality and equality of taxation". The issue of improving the procedures for determining the cadastral value of immovable property, as well as the mechanisms of the appraisers' activity, requires further elaboration [3].

Analysis of the consequences of tax administration and tax policy issues

1. The basic concepts of real estate tax.

Adam Smith proposed to transfer the volume of the taxing from profits and wages to land rent. This, to his opinion, was to contribute of investments in improving production, to restrain price growth, and to lead to the redistribution of duties in paying taxes mainly to the rich segment of the population of that time - large landowners (landlords) [1]. Today, introduction of a new property tax at its market value with simultaneous cancellation of existing property payments (personal property tax, property tax of enterprises, and payment for land) is very promising as one of the components of the ongoing tax reform.

Real estate for tax purposes includes land plots, as well as related buildings and structures that cannot be moved without violating their functional purpose. It should be noted that the interpretation of the concept of real estate associated with the tax in question may differ from that adopted in the legislation of a particular country. Thus, the Civil Code of the Russian Federation (Article 130, paragraph 1) includes in the real estate not only buildings, structures and land, but also aircraft, ships and spacecraft. But there are not considered in the context of the concept of real estate tax [5].

There are also some definitions to speak about. The market value of real estate - is the most probable price of this property in a competitive and open market with all signs of a fair deal when the actions of the seller and the buyer are prudent and competent and the selling price is not affected by atypical factors. The estimated value of the property - is the value of the property (real estate object) determined by the individual appraiser or using standardized procedures of the so-called mass estimation for a certain date based on its market cost.

2. The peculiarities of real estate taxation in the world practice.

Today many countries have accumulated rich experience in taxation of real estate. The world practice has already worked out the basic principles allowing organizing the taxation in the most rational way. These principles are more or less reflected in the legislation of most countries. Among them, in particular, the following: legislative tax estate administration

? The objects of taxation are the land, buildings and structures, as they are relatively easy to identify and identify, unlike movable property.

? The basis for calculating the tax base is the market cost of taxable objects, which stimulates their economically most rational using.

? In determining the cost of real estate, isn't used the individual evaluation of each individual object, but a mass estimate based on the application of standard procedures for calculating the price of objects for tax purposes. This allows evaluating a large number of objects.

? Exemption is granted to either socially unprotected taxpayers, or by types of real estate that provide for the implementation of public benefit activities, or for objects in state (municipal) ownership, in order to avoid "shifting money from one pocket to another."

However, the specific features of real estate taxation can vary from one country to another.

In determining the cost of objects for taxation, market information is usually used in one way or another, but in some countries (France, partly the UK), the lease value (the potential average annual value of rental income for real estate) is taken as the basis, and in most other countries, applying the tax on real estate - capital, that is accumulated, and not the average annual value of the object [4].

The schemes for granting exemption can also vary by country. So, in Denmark, South Korea, Chile, Sweden, Japan, the privileges are applied only to real estate objects, but not to taxpayers. In other countries, there is a combination of the both preferred taxpayers, as a rule, are pensioners and invalids, in addition, in some countries the income level of the taxpayer is taken into account. To the types of real estate that are fully or partially exempt from tax, in most countries are cultural objects, education, intended for public needs, public administration, for religious purposes. Exemption from payment of taxes can be given and for some fixed period with the purpose of stimulation of certain types of activity. So, in Chile, Sweden, Japan and two US states the privilege is granted for new buildings for several years, and in the Netherlands - for the period of construction of the building [4].

As for the tax rates, everything depends on the specific legislative and economic practice in this or that country. Depending on the legally established method of determining the tax rate, there are fixed and variable (budget) rates. Fixed rates are set by the central authorities of a country and represent a certain initial percentage of the taxable cost. At the same time, it is impossible to determine in advance the amount of tax revenues, since the amount of the taxable base varies from year to year. This procedure for setting rates has been adopted in the UK, Indonesia, Chile, Sweden, South Korea, Japan. In other countries (Australia, Canada, the Netherlands, the United States, France, Switzerland), local authorities plan a real estate tax rate based on the expected budget expenditures and the size of the available tax base. The tax rate is thus a variable. In some cases, such as in the Netherlands and some cantons of Switzerland, local authorities have the widest authority in choosing the rates, in most other cases, there are national and regional regulations that limit the minimum or maximum rate, or even and the other together. The specific amount of the rate can vary by country from a fraction of a percent to 7-10% with tax ratios of 20-100%.

3. The tax on real estate in Russia: history and modernity

The Russian Tax Code establishes a property tax as a regional tax. It includes three separate taxes: land tax, corporate property tax, property tax on individuals [7]. The tax base is determined depending on the value of the property. There are two categories of tax benefits: at the federal and regional levels. The real estate tax existed in pre-revolutionary Russia. The tax reform in the field of land taxes, conducted in 1921, touched only some of real estate objects. In 1926, a decree "About the Payment of residential premises in Cities and Workers' Villages" was adopted.

For legal entities there is a similar tax on the property of organizations whose legal regime is established by the norms of Chapter 25 of the Tax Code of the Russian Federation [7]. The object of taxation in accordance with Article 401 of the Code is the following property located within the municipality (city of federal significance in Moscow, St. Petersburg or Sevastopol):

? Housing building;

? A dwelling (apartment, room);

? Garage, car place;

? A single immovable complex;

? The object of unfinished construction;

? Other building, structure, premise.

Accommodation buildings located on land plots granted for the conduct of personal subsidiary, summer cottage, truck farming, gardening, individual housing construction, belong to housing buildings.

Starting from the tax period of 2015 and until 2020, at the choice of the subject of the Russian Federation, the cadastral cost or inventory cost, calculated taking into account the deflator coefficient, which is established by the Ministry of economic development of the Russian Federation, is used as the taxable base for the personal property tax of individuals.

In choosing cadastral price by the taxpayers, there are following rules:

? for apartments cadastral cost, reduced by the cadastral price of 20 square meters of the total area of this apartment;

? for rooms cadastral cost, reduced by the value of cadastral price of 10 square meters of the area of this room;

? for a built-up house cadastral cost is reduced by the amount of cadastral price of 50 square meters of the total area of this apartment building (for the purposes of calculating the tax, residential buildings located on land plots allocated for personal subsidiary, summer cottage, truck farming, gardening, individual housing construction, belong to residential buildings);

? for a single real estate complex, which includes at least one housing building (dwelling house), cadastral value, is reduced by one million rubles.

At the same time, the representative bodies of municipal entities (legislative (representative) bodies of state authority of cities of federal significance in Moscow, St. Petersburg and Sevastopol) are entitled to increase the amounts of sizes specified in the Code.

In addition, while calculating the tax during the first 4 years of applying the cadastral cost, the lowering coefficients are taken into account.

In case of applying the inventory cost, the tax base is determined in respect of each taxation object as its inventory price calculated taking into account the deflator coefficient on the basis of the latest data on the inventory value submitted in accordance with the established procedure to the tax authorities before March 1, 2013. Until 2015, property tax was paid until November 1. According to the amendments to paragraph 1 of Art. 409 of the Tax Code from 2015, the tax should be paid before October 1.

The real estate tax of individuals will be calculated based on the average market price of 1 mІ of real estate and taking into account the tax rate, which can vary from 0, 1 to 2%. In the regions today, property tax for a standard two-bedroom apartment is about 700 rubles. After recalculating the tax under the new rules, the amount will increase almost twice to 1120 rubles. The calculation was made for an apartment of 55 mІ with a tax rate of 0.1% and based on the average market price per 1 mІ of 32 thousand rubles, according to the Federal Tax Service of Russia, and taking into account benefits. The owner of the apartment will be entitled to a tax deduction equal to the cost of 20 mІ of his real estate[7].

As for Muscovites, they will have to pay a more substantial amount. So, if the cadastral value of 1 square meter of a metropolitan apartment is equated to the market average, which now amounts to 160,000 rubles per 1 sq. m., and calculate a tax for housing of 54 sq. m at a rate of 0.1%, it will amount to 5,440 rubles. This amount will have to be paid to the owners in 2020. But, during these five years, the law provides for an opportunity to raise the tax rate to 0.3%, or reduce it to 0%. If officials in five years increase the tax rate to 0.3% of the cadastral value, then the tax on real estate of individuals in Moscow will grow in 20 times. And from 1300 rubles in 2012 will reach 20 thousand rubles in 2020.

To calculate the real estate tax for individuals, a differentiated system of tax rates will be applied. Owners of shopping centers, office buildings and other commercial real estate will pay tax based on the rate of 2%. The same rate will be applied to calculate the tax levied on the owners who have registered the ownership of the elite real estate. Under the category of "elite" gets a home worth more than 300 million rubles. For housing buildings, dachas, apartments, rooms, garages and outbuildings, car places and unfinished houses, regions will be able to set rates from 0, 1% to 0.3%, or reduce it to 0%, which is unlikely. The remaining real estate will be subject to a tax rate of up to 0.5%.

Conclusion

Thus, the article examined the features of the real estate system in the Russian Federation, namely: the legal norms on real estate (the Housing Code, various legislative acts and initiatives), issues of real estate taxation (basic concepts, experience of world practice, taxes in the Russian Federation), land a question in the cadastral system of the Russian Federation.

Real estate is a type of property that is legally recognized as immovable. The property of origin includes land plots, subsoil plots and everything that is firmly connected with the land including: buildings, structures, objects of unfinished construction. All transactions in the real estate market are carried out on the basis of the state-approved legislative framework. It includes the totality of all legal acts relating to real estate. The contract of sale, lease, deposit, concluded in violation of the law, is recognized as invalid. Under current Russian law, real estate transactions are subject to compulsory state registration and are considered to be concluded only on condition of such registration. In Russia, the registration of transactions with real estate is conducted by a special state body - the Federal Service for State Registration, Cadastre and Cartography. Nowadays, the authorities are reforming the tax, financial and legal management of real estate.

References

1. Adam Smith, The Wealth of Nations Book V, Chapter 2 Of the Sources of the General or Public Revenue of the Society, Part 2, Article I: Taxes of the Rent of Houses URL: http: //wikisource.org/ wiki / The_Wealth_of_nations / Book_V / Chapter_2.

2. Federal Law No. 218-FZ of July 13, 2015, "About state registration of real estate" (Law No. 218-FZ) - Electronic version. Access mode: http://www.consultant.ru/document/cons_doc_LAW.

3. Koksharov I.V. Taxation of real estate: Russian and foreign practice / / the practice of international business. 2002. No. 6.

4. Shandirov O.L. Taxation of real estate abroad // Finances. 2001. No. 8.

5. The Civil Code of the Russian Federation - Electronic version. Access mode: http://www.consultant.ru/document/cons_doc_LAW.

6. The Housing Code of the Russian Federation from 29.12.2004 N 188-FZ (as amended on 03/04/2018) - Electronic version. Access mode: http://www.consultant.ru/document/cons_doc_LAW_51057/.

7. The Tax Code of the Russian Federation (Tax Code of the Russian Federation) of July 31, 1998 N 146-FZ.-Electronic version. Access mode: http://www.consultant.ru/document/cons_doc_LAW_19671/#p415.

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