Our regular customer, a German citizen, has addressed us. He has been living in the Russian Federation for a long time, he is staying here on a working visa, he acquired the real estate long ago. By the way, it was we who closed this deal. Now, he has got a new need — to sell his apartment in Moscow. His goal is to legally minimize the tax payable. The opinion that he was supposed to give 30% of the apartment cost to the State in the form of a «predatory» tax, withheld him from the real estate sale for a long time. We prepared a written advisory opinion for him — it turned out that this tax does not apply to him. Then, we proceeded to the legal support for the apartment sale.
Let’s start with the main thing: the seller’s citizenship, presence or absence of a temporary residence permit and permanent residency do not matter, in our case the «tax resident» concept is of most importance. A tax resident of the Russian Federation is a person who actually stays in the territory of the Russian Federation for at least 183 calendar days during 12 months. If a person is not considered a tax resident, then with respect to his income (and the apartment sale will be income), 30% rate is used. It means that if you have stayed in the Russian Federation for at least 183 days during the last 12 months, you are a tax resident of the Russian Federation. And you pay not 30%, but only 13%.
Now let’s have a good look at 13%. Is it really necessary to pay it?
13% is the individual income tax. This tax is paid only if you purchased an apartment less than 5 (earlier 3) years ago. If more, then you do not pay it at all. That is, 13% will be paid if an apartment was purchased less than 5 years ago, and the tax will be assessed only from the income amount, i.e. the difference in the purchase and sale values. If you sell an apartment for the same price for which you bought it, you do not pay the tax. The tax is paid only on the difference.
What should you do, if are not a tax resident?
— to live in Russia for 183 days;
— to gift an apartment to a relative;
— to indicate the cost in the sale and purchase agreement — we do not recommend to do it.
Let’s consider each option:
for someone it is not the most pleasant thing, and you have business, work abroad, but if you calculate what you will save, you may stay and live. For example, an apartment costs 10 million rubles. If you are a non-resident, the tax will be 3 million rubles, if you are a resident, the tax will be only 1.3 million rubles, and you will save 1.7 million rubles for half a year; these are rather good earnings for half a year for residence in the Russian Federation. But not everyone fits this option;
the matter is that such deals between relatives are not subject to taxation. According to the tax legislation of the Russian Federation, the income received by way of the real estate gift is exempt from the individual income tax, in the event that the donor and the donee are family members. And if the donee is not only your close relative, but also a resident of the Russian Federation, he/she will pay only 13% of the tax in the event of further sale;
we do not recommend to do it. First, it is a violation of the legislation of the Russian Federation. Second, the time when tax inspectors do not track this, has passed. Third, there is a further risk not to get the entire real estate value and a risk that the deal will be torn up.
If you are a foreign citizen or you are not a tax resident of the Russian Federation, and you need to sell the real estate in Russia, we will choose for you the most optimum option for the property right alienation. We havea great experience in supporting similar deals. Our services cost is much lower than the saved money cost. We are engaged in the legal support of the purchase and sale deals, but not the sale. Click this link for our service description.