RS Q & A Sales of real estate to a natural person

Sales of real estate to a natural person

A foreign company (registered in Cyprus) sells real property and land in Russia to a natural person who is a Russian resident. The natural person is not registered as a sole proprietor. The representative office of the foreign company that conducts auxiliary operations in Russia is located separately from the real property being sold.
Can the foreign company delegate its authority to pay taxes on the proceeds from the sale to its representative in Russia? What documents are needed for this?

The tax code of the Russian Federation allows tax payers to participate in relations regulated by the taxation law through a legal or authorised representative. Representation in terms of taxation means that the representative performs some actions on behalf and at the expense of the person he/she represents. An authorised representative may represent the interests of a tax paying foreign company on the basis of a power of attorney issued in accordance with the civil law.

In the case of this particular transaction, the foreign company will have to pay VAT and corporate income tax.

Corporate income tax

Experts believe that a representative office of the foreign company can act on the basis of a power of attorney to submit an income tax declaration and pay the income tax to the budget. A representative of the foreign company may submit a tax declaration to the tax authority the company is registered with (the one that has jurisdiction over the territory where the real property is located).

The rate of the corporate income tax that a foreign legal entity has to pay after selling real property in Russia is 20%.

VAT

According to the experts, a representative can also use a power of attorney to pay VAT and submit a VAT declaration on behalf of the foreign company.

Prepared by experts of the GARANT Legal Consulting Service
For detailed explanations of the reply, please, contact the authors