Company News

Property tax to increase for owners

From the beginning of 2014 there will be some amendments made to the Tax Code, according to which the property tax for owners of shopping centers, office buildings and restaurants will increase by several times. This law was signed by Vladimir Putin in early November. Expenses for large owners of retail and office premises, such as "Adamant", a holding «Imperia», X5 Retail Group, group of companies "Dixie" can grow by hundreds of millions of rubles. In turn, this may lead to an increase in rental rates, prices in retail stores and a new wave of lawsuits from owners against Russian State Register, experts say.

According to a document signed by Putin, starting next year the tax on retail and office buildings, public catering facilities and domestic services premises, as well as on organizations’ property registered abroad will be computed using not the cadastral, but the balance value. This can lead to an increase in tax for some companies in many times, experts say.

Owners will be closer to the market

In St. Petersburg, the new system of tax computation will take effect in 2015. To run this system it is necessary to adopt a regional law that will set the tax rate. Limit values are defined in the federal center: in 2014 the tax may amount to no more than 1 % of the cadastral value, in 2015 - no more than 1.5 %, and in 2016 and further - 2%. At the regional level the committee has the right to reduce the tax rate. For example, in 2015 it can estimate 1 % rather than 1.5%, - reported the press service of the Committee for land resource.

So far each year in St. Petersburg 2.2% of the balance value of commercial real estate is collected. This is the highest rate specified by federal law. As a rule, the balance value differs significantly from the market value. It is not indexed with price growth on the market, but it is fixed at the time of construction, reconstruction or asset valuation. And then it only decreases with account of amortization factor.

Federal legislators decided to correct this omission. To do so, they decided to compute property tax using the cadastral value of the objects which will be as close as possible to the market value. In St. Petersburg, the corresponding property assessment was conducted in the second half of 2012 by the City Department of inventory and real estate appraisal (State Unitary Enterprise “GUION”). In January 2013 it was approved by the order of the Committee for Land Resources. "The Cadastral value of estimated objects does not include the cost of land. Its value depends primarily on the quality of the construction - their functional use, area, year of construction, material of walls, floors, and other characteristics," - explains Alexander Zlenko, CEO of State Unitary Enterprise “GUION”.

Multiple growth

Currently, owners pay property tax using its balance value. Every year balance value is reduced by the amount of depreciation of the building, depending on its life expectancy. Accordingly, the older the building, the lower the tax. Thus, balance value has relation neither to the real value of the building nor to the actual state of its structures. This quantity is not indicated in public records. It is showed only in the book of accounts. At the same time, companies usually try not to disclose this information. "We cannot tell you the difference in balance and cadastral values of our objects" – tells the representatives of "Adamant" holding to “Fontanka”. According to Colliers International data, the share of the company accounts for about 26 % of premises in shopping centers of Saint Petersburg. Such companies as "IB Group”, Fort Group, Jensen Group, and Stockmann also did not evaluate perspective tax increase.

However, a rough idea of the future tax increase can be obtained by the difference of the inventory and cadastral values. Inventory value is the cost of the building at the moment of its entry into service. For new buildings, it is very close to the balance value.

Owners whose property is registered for foreign companies are also waiting for a raise. So far, they should pay property tax using the inventory value. But in future cadastral value will be also added. According to the data of State Unitary Enterprise “GUION” this difference is significant for buildings and premises used as restaurants - 2.9 times. The difference in inventory and cadastral values for retail and office complexes is 2.5, for the markets and office buildings - 2.1, for cafes - 2. The average price per square meter in retail premises fluctuates from 20.4 thousand rubles in Kurortny District to 35.7 in Central District. Also among the most expensive districts are Vasileostrovsky, Admiralteysky, Moscovsky, Petrogradsky. Average cadastral value for office premises is 23.7 thousand rubles in Kalininsky district up to 32.7 in Petrogradsky District.

Continuous taxation

According to the data of the Finance Committee in 2012 about 25 billion rubles came in the city budget under the article “Tax on the assets of organizations”. This year, according to the data as of the 1st of October, the companies have already paid 21.2 billion rubles. It is planned to collect 28 billion. Thus, it is impossible to estimate by how much budget revenues will increase as a result of changes in tax legislation. The fact is that the difference between balance and cadastral values for each object is individual. "A tax increase will affect all business players. Payments will increase several times. For individual projects the increase may amount to 10 or even more times" - evaluates Alexander Veselov, Development Director at ASTERA in alliance with BNP Paribas Real Estate.

It is also difficult to estimate the affect of the tax increase on the work of the companies. With the help of requested premises the tenants (companies and shops) will be able to raise rental rates, and retail prices for grocery store chains. "However, there are very few of those on the market. The majority will be forced to cut expenses in order to avoid rising of rates, which can be critical for the tenants," - says Alexander Veselov. “This, in turn, will affect the competition. And perhaps, shopping centers, such as the shopping center "Galeria", which compete for tenants with large objects, will even have an advantage”, says Yuri Borisov, Managing Director of "IB Group".

The second possible consequence of law adjustment is a new wave of lawsuits from companies against Federal Service for State Registration, Cadastre and Cartography, and against the Committee for Land Resources. "The future impact of the new law on the market, apparently, will also be in the fact that the owners will try to dispute the cadastral value of the object", - says Dmitry Kozunov, Development Director of Colliers International Project Evaluation in St. Petersburg. It is to be recalled that in 2012 about 180 of St Petersburg enterprises (including such car factories as Toyota and Hyundai, Imperial porcelain factory, and JSC “Metrostroi”) applied to Arbitration Court. They were dissatisfied with tax increase on land. Smolny resolved a dispute with major companies by making 20% "discount" on the cadastral value.

However, from 2015 there will be an increase in tax not only on commercial real estate. New cadastral value of residential space was defined by the same order of Committee for Land Resources dated 15th of January 2013 on the approval of the results of the cadastral value of real estate in St. Petersburg. Since 2015 the tax on apartments will grow by at least 50%.

Source: "Fontanka.ru"