RS Brief news Luxury tax jeopardized

Luxury tax jeopardized

June 2013

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The Russian President has instructed the Government to take steps toward imposing a luxury tax. In Russia, imposition of this tax has been discussed for several years now. Exactly a year ago, Russian Survey addressed this issue in its overview of Vladimir Putin’s presidential program, where Mr. Putin promised that a tax maneuver would be carried out in Russia. This tax is aimed at making the Russian tax system fairer.

At present, the Ministry of Finance of the Russian Federation is preparing a draft law on the imposition of a real estate tax. This law is expected to take effect from 2014 and combine a property tax and a land tax. However, cadastral valuation of lands is still unfinished in Russia, making the introduction of this draft law challenging.

According to Ministry of Finance experts, different tax rates will be applied in Russia, depending on the cadastral value of land. For instance, if the aggregate cadastral value of all real estate items does not exceed 100 million rubles, a 0.05% tax will be levied, while 0.1% and 0.3% rates will be applied to real estate worth 100–300 and exceeding 300 million rubles respectively.

In addition, the luxury tax will cover expensive cars. In this context, higher vehicle-tax rates will be applied, especially so to cars whose value exceeds 5 million rubles. For example, a doubled vehicle tax will be levied on cars worth 5–10 million rubles on average whose age does not exceed 5 years.

A tripled rate will be applied to 10–15-million-ruble cars under 10 years old, with the same rate applicable to cars worth more than 15 million rubles whose age does not exceed 20 years.

The President noted that the final phase of cadastral valuation of lands should be expedited to make it possible to amend tax laws. RS