Reduction of cadastral value: how much can you save and how much should you pay?

Reducing the cadastral value: how much can you save and how much should you pay?

A brief overview on how to correctly apply the disputed cadastral value in order to get the maximum savings on taxes and other payments for land and real estate

What is the "cadastral value" and why reduce it?

Almost any real estate object (land, building, premises, structure) has such a characteristic as cadastral value.

• It is a conditional monetary valuation of a real estate object - it is determined by the state using methods of mass valuation of real estate objects, and, as a rule, differs from the market value individually determined for a particular object.

• More and more payments for real estate depend on the cadastral value, for example: land tax, rent and even personal income tax when receiving real estate as a gift.

• If the cadastral value is reduced, then payments for real estate will proportionally decrease. On average, the result of savings can range from hundreds of thousands to tens of millions of rubles.
  

How is the payment for real estate recalculated if the cadastral value decreases?


Land tax

ZN \u003d cadastral value * 1.5% (or 0.3% - for preferential cases)

Rule: The cadastral value obtained as a result of the dispute is applied from the date when the cadastral value that was disputed began to be applied for tax purposes. But you can make a refund / offset for no more than the last 3 tax periods

(Reason: clause 2 of Article 403 of the Tax Code of the Russian Federation)

Example:

The cadastral value of the land plot was determined from 01/01/2016. The buyer's ownership of the plot was registered in 2017. The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020.

This means that the buyer can recalculate the tax from the new (disputed) cadastral value from 2017 to 2020 and beyond, until the next cadastral valuation of such land plots (of this category) takes place in the region.


Personal property tax

H = cadastral value * 0.5 (or 2% - for objects included in the special List)

Rule: The cadastral value obtained as a result of the dispute is applied from the date when the cadastral value that was disputed began to be applied for tax purposes. But you can make a refund / offset for no more than the last 3 tax periods

(Reason: clause 1.1 of Article 391 of the Tax Code of the Russian Federation)

Example:

The cadastral value of the object was determined from 01/01/2016. The buyer's ownership of the object was registered in 2017. The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020.

This means that the buyer can recalculate the tax from the new (disputed) cadastral value from 2017 to 2020 and beyond, until the next cadastral valuation of capital construction projects takes place in the region.


Property tax of legal entities

H = cadastral value * 2% (only for objects included in the special List)

Rule: The cadastral value obtained as a result of the dispute is applied from the date when the cadastral value that was disputed began to be applied for tax purposes. But you can make a refund / offset for no more than the last 3 tax periods

(Reason: clause 15 of Article 378.2 of the Tax Code of the Russian Federation)

Example:

The cadastral value of the object was determined from 01/01/2016. The buyer's ownership of the object was registered in 2017. The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020.

This means that the buyer can recalculate the tax from the new (disputed) cadastral value from 2017 to 2020 and beyond, until the next cadastral valuation of capital construction projects takes place in the region.

  
Lease payments for a land plot that is in state or municipal ownership (or Unjust enrichment for use without registration of rights):

AP (in the Kemerovo region) = cadastral value x Kv x Ku x Kk x Ki x Kp x Kpr

The cadastral value obtained as a result of the challenge is applied no earlier than January 1 of the year when the challenge was filed.

(Reason: Paragraph 5, Article 24.20 of the Federal Law "On Appraisal Activities in the Russian Federation" No. 135-FZ)

Example:

The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020. This means that it is possible to recalculate the rent (unjust enrichment) from the new (disputed) cadastral value from 2019 onwards until the next cadastral valuation passes.


Tax on personal income of sellers on the sale of real estate that has been owned for less than 3 or 5 years

H = 70% * cadastral value * 13%

Rule: The cadastral value obtained from the results of mating shall apply not earlier than January 1 of the year in which the application for contestation was filed. At the same time, an application for contestation must be submitted no later than December 31 of the year in which the state registration of the transfer of ownership of the sold property was carried out.

(Reason: Paragraph 5, Article 24.20 of the Federal Law "On Appraisal Activities in the Russian Federation" No. 135-FZ)

Example:

The ownership right of the buyer of the property was registered in 2019. The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020. This means that personal income tax can be recalculated taking into account the new (disputed) cadastral value. In addition, the tax on the property of an individual will be calculated from the new cadastral value.


Tax on the income of individuals donee for everyone, except for family members and close relatives, in case of donation after 01/01/2020 (Article 214.10 of the Tax Code of the Russian Federation after 01/01/2020)

H = 100% * cadastral value * 13%

Rule: The cadastral value obtained as a result of the contestation is applied no earlier than January 1 of the year when the contestation application was filed. At the same time, an application for contestation must be submitted no later than December 31 of the year in which the state registration of the transfer of ownership of the sold property was carried out.

(Reason: Paragraph 5, Article 24.20 of the Federal Law "On Appraisal Activities in the Russian Federation" No. 135-FZ)

Example:

The property right of a citizen who received a property as a gift was registered in 2019. The challenge was filed in 2019, and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020. This means that personal income tax can be recalculated taking into account the new (disputed) cadastral value. In addition, the tax on the property of an individual will be calculated from the new cadastral value.


Redemption price for a land plot acquired from state or municipal property

C = cadastral value * 100% (or 5%, 15%, 60% - for "preferential" cases)

Rule: The cadastral value is applied at the time of the purchase of the land

(Article 8 of the Law of the Kemerovo Region dated February 7, 2013 No. 10-OZ “On the procedure for determining the price and payment of land plots”)

Example:

The buyout and contestation application was filed in 2019 (but the sale and purchase agreement was not signed), and the decision of the commission / court to establish the cadastral value equal to the market value was made in 2020. You can submit a new application for redemption after entering a new (disputed) cadastral value in the USRN and signing a sales contract at a price calculated from the new cadastral value.


You can reduce the cadastral value in the following ways:

(1) challenge through a commission under the Office of Rosreestr of a constituent entity of the Russian Federation or through a regional (and equal) court of general jurisdiction;

(2) change the category or type of permitted use of the land;

(3) correct a cadastral error (for example, object type);

(4) challenge the normative act that approved the cadastral valuation.

 
How much does it cost to dispute the cadastral value?

Prices for works (services) to challenge the cadastral value:

• from 15,000 rubles - advance payment of the costs of the assessment, extracts from the USRN and certification of copies of documents by a notary;

• 10,000 rubles - advance payment for the provision of legal services to reduce the cadastral value through the Commission at Rosreestr + 10% based on the result of the actual savings on the payment for real estate

• 20,000 rubles - advance payment for the provision of legal services to reduce the cadastral value through the court + 10% as a result of the actual savings on the payment for real estate.

Total: 25,000 rubles - the minimum cost of reducing (disputing) the cadastral value with expenses for 1 property.

Order the service of contesting the cadastral value in our company!


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Cadastral value: how and when to challenge in 2019-2020?

Author

Dmitriy Alexandrovich Malinin

Chairman of the Bar Association "Jurproekt"