Who will be able to reduce corporate property tax in 2020

The Governor of the Kemerovo Region, in his Decree No. 33-rg dated March 31, 2020 approved the list of priority measures support for SMEs in the context of the spread of COVID-19.

The following support measures were provided for property owners:

1. Reducing the corporate property tax rate from 2% to 1% for 2020 in relation to retail and office real estate for certain categories of taxpayers (subject to a reduction in rent to tenants)
2. Providing deferred payment of rent under lease agreements for (a) land plots, (b) state (municipal) property until the end of restrictive measures in the context of the spread of a new coronavirus infection.

In order for the support measures to work, it was necessary to make changes:

• in relation to the property tax of organizations - in the regional law "On the tax on property of organizations" - 04/09/2020 adopted Law #44.
• with regard to rent - to the resolutions of the Collegium of the Administration of the Kemerovo Region (No. 47, 62, etc.) - resolutions in Electronic Bulletin of the Government of the Kemerovo Region - Kuzbass as of April 15, 2020 were not published.

1. Reducing the property tax on the cadastral value from 2 to 1%

Prior to the adoption of the law, the tax rate for 2020 for corporate property tax in the Kemerovo region and most regions of Russia was 2% of the cadastral value of the property.

Who pays tax at this rate?

Taxpayers are legal entities that own real estate objects that simultaneously meet two conditions:

1. The objects belong to the category: (a) administrative and business centers, shopping centers (complexes) with a total area of ​​over 1000 sq. meters and rooms in them; (b) non-residential premises with a total area of ​​over 250 sq. m., the purpose, permitted use or name of which is offices, retail facilities, public catering and consumer services, or which are actually used to accommodate such facilities;
2. These objects must be included in The list approved by the executive authority of the constituent entity of the Russian Federation for 2020 (Decree of the Administration of the Kemerovo Region dated December 3, 2019 No. 6-ra).

Who will get the property tax cut in 2020?

This measure applies only to those legal entities whose main OKVED in the Unified State Register of Legal Entities as of March 1, 2020 is included in the list in accordance with the annex to this regional law new coronavirus infection, approved by Decree of the Government of the Russian Federation of April 3, 2020 No. 434) .

Please note that this support measure does not apply to personal property tax. That is, if a shopping center or premises in it are owned by a private person who pays a tax on the property of an individual in the amount of 2% of the cadastral value, then the adopted regional law will not help reduce this tax. The issue of reducing the tax on the property of individuals is within the competence of municipal authorities.

2. Reduction of property tax from the average annual cost from 2.2% to 1.1%

Prior to the adoption of the law, the tax rate for 2020 for corporate property tax in the Kemerovo region and most regions of Russia was 2.2% of the average annual value of a property.

Who pays tax at this rate?

Taxpayers are legal entities that own real estate objects and simultaneously meet two conditions:

1. They do not apply the simplified taxation system, which allows not to pay tax on the property of organizations (clause 2 of article 346.11 of the Tax Code of the Russian Federation);
2. They are not required by law to pay property tax on the cadastral value (paragraph 2 of article 375, article 378.2 of the Tax Code of the Russian Federation).

Who will get the property tax cut in 2020?

The same criteria as for the property tax of organizations from the cadastral value (see earlier).

3. What should landlords do if their OKVED is not included in the list?

They are provided with a reduction in property tax by the amount by which they reduce the rent to their tenant, but the tax can be reduced by no more than 50%.

Property owners will receive a reduced rate of property tax properties that have entered into an additional agreement with their tenants to reduce the rent, subject to the following conditions:

1. the lease entered into prior to March 1, 2020, and was duly registered (although we understand that the requirement to register a lease is only for leases of 1 year or more; in general, unregistered short-term leases may have problems obtaining this support measure).
2. an additional agreement to the lease agreement was concluded after March 1, 2020 (an additional agreement on rent reduction is assumed);
3. in relation to these buildings and premises, state registration of property rights was carried out (there are earlier property rights to real estate that may not be registered in the USRN)
4. the main type of economic activity of the tenant in accordance with the information of the Unified State Register of Legal Entities / EGRIP as of March 1, 2020 is one of the following types:
   
   a) in accordance with the annex to this regional law (as we found out earlier, it copies the list of the most affected sectors of the Russian economy, approved by Decree of the Government of the Russian Federation of April 3, 2020 No. 434) or
   
   b) refers to section G “Wholesale and retail trade; repair of motor vehicles and motorcycles” OKVED OK 029-201.

4. How can you suddenly lose the right to a reduction in corporate property tax?

Regional Law No. 44 does not apply to taxpayers brought to administrative responsibility in the period from March 16, 2020 to December 31, 2020 due to non-compliance with restrictive and other measures established by the Governor of the Kemerovo Region — Kuzbass in order to counteract the spread of a new coronavirus infection (COVID -19).

This refers to 3 types of offenses provided for by the Code of Administrative Offenses (we slightly simplified the name of the violations compared to what is written in the code):

• article 6.3 (violation of sanitary rules and hygiene standards, failure to comply with sanitary and hygienic and anti-epidemic measures during the emergency regime or in the event of a threat of spread /1200" target="_blank">a disease that poses a danger to others, or during the period of implementation of restrictive measures (quarantine) in the relevant territory, or failure to comply with the issued legal order or the requirement of the state sanitary doctor to carry out sanitary and anti-epidemic measures in time events);
• part 1 of article 19.4 (disobedience to a lawful order or requirement of the state sanitary doctor);
• article 20.6.1 (failure to comply with the rules of conduct when a high alert regime is introduced in a territory where there is a threat of an emergency, or in an emergency zone).
• In addition to the fact that fines for violations under Articles 6.3 and 20.6.1 of the Code of Administrative Offenses are set at a fairly high amount (up to 1 million rubles), the right to a reduced property tax rate can also be lost.

And now the questions…

We assume that gaps and contradictions may arise in the implementation of this law. For all questions, you can seek advice on any communication channels of the Bar Association "Yurproekt".

Author

Dmitriy Alexandrovich Malinin

Chairman of the Bar Association "Jurproekt"