82 | Investor Guide to Europe 2014
The extract will contain a description of the property (type,
address, size) and reflect the type of registered right to the
property, the holder of the right, as well as encumbrances and
restrictions of the registered right as at the date of the extract.
State Real Estate Cadastre
•
All real estate in Russia is also supposed to be recorded in the
State Real Estate Cadastre.
•
Conveyancing or encumbering land plots which have not
undergone the procedure of official survey and cadastral
record are deemed null and void, though forward sale and
forward lease (whereby an agreement envisages conveying
or encumbering title that is yet to be created) are allowed (at
present, there are no similar restrictions in respect of buildings
and other fixed facilities).
aCQuISITIon PRoCESS:
KEY STaGES
A typical sale and purchase transaction is a two-stage process
involving the execution of a sale and purchase agreement and
registration of the transfer of title in the Unified State Register of
Real Estate.
The sale and purchase agreement must be a single written docu-
ment; an agreement by fax or exchange of letters is not valid.
The hand-over of the property is effected by completing a docu-
ment which formally conveys the property from the seller to the
buyer.
As a general rule, if a building or other immovable facility and the
underlying land are owned by the same person, sale of the buil-
ding without the underlying land (and vice versa) is not allowed; if
the land happens to be the property of someone other than the
owner of the building, the building can still be sold, and the new
owner will enjoy the same rights to use the respective part of the
land plot underlying the building as the previous one.
Russian law also knows the concept of forward sales of real
properties (sale of real properties which are under construction
or even not in existence); taking this into account preliminary
contracts are no longer used for sale of future real properties.
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acquisition by foreign investors
The following restrictions apply to ownership of land in Russia by
foreign nationals:
- foreign individuals and entities are not allowed to own
land in areas adjoining the borders of Russia; and
- foreign individuals and entities as well as Russian entities
with over 50% foreign participation may not own agricul-
tural land.
Subject to the above restrictions, property can be purchased or
leased by individuals and companies for their own use or as an
investment.
There are no specific restrictions as to lease of land or ownership
or lease of buildings and facilities by foreign nationals.
CoMMERCIaL LEaSES
Commercial leases are treated very much as a matter of private
concern, with a rather limited number of mandatory rules and
restrictions.
While most of Russia’s land is still state or municipally owned,
commercial property is predominantly privately held.
As a matter of practice, commercial lease terms tend to favour
the landlord or the tenant depending on their respective econo-
mic strength, bargaining power and the market conditions in a
particular location.
In the past few years the lease market in the developed regions
of Russia such as Moscow has been heavily landlord-driven, and
leases have tended to benefit the landlord (for example, the lan-
dlord having the right to terminate without recourse to the court
for the most minor breaches by the tenant, with no corresponding
rights for the tenant); however, as a result of the recent economic
downturn the position of the landlord has been weakened and
tenants have increased their negotiating power in this area.
TaX
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vaT
•
Generally, commercial property transactions are subject to
VAT. Presently, sale of land and residential property transac-
tions are not subject to VAT.
•
The standard VAT rate is 18%.
•
A company’s VAT liability is generally calculated as its out-
put VAT invoiced to customers minus the value of input VAT
invoiced to the company by suppliers or paid to customs upon
the importation of goods. If the amount of input VAT exceeds
the amount of output VAT then the difference is recoverable.
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Withholding tax
•
The sale of a Russian company by its foreign parent entity may
be subject to withholding tax in Russia if more than 50% of the
Russian company’s assets are real estate (exceptions may be
provided in double tax treaties).
Î
Property tax
•
Russian companies are liable to pay property tax on the ave-
rage annual net book value (in certain cases — cadastre value)
of the fixed assets on their balance sheet acquired before 1
January 2013; all movable fixed assets acquired after 1 January
2013 are exempt from property tax.
•
Foreign companies with a permanent establishment in Russia
are subject to tax on immovable and movable fixed assets
attributable to such an establishment (subject to the above
exemption for movable fixed assets acquired after 1 January
2013). Foreign companies without a permanent establishment
in Russia are subject to property tax on immovable property
only.
•
Land is exempt from property tax and may be subject to a
separate land tax.
•
The standard property tax rate is 2.2%; special rates apply to
property taxable in cadastre value; regional authorities may
reduce that rate or even provide a full exemption for all or
certain categories of taxpayers.
