How to Reduce Tax When Selling an Apartment

The only way to reduce tax when selling an apartment is to lower the cadastral value of the property in the sale agreement. Unfortunately, this is rarely possible. First, buyers want to receive a full tax deduction of 260,000 rubles for real estate valued at over 2 million rubles. Second, the tax authority closely monitors transactions made below the cadastral value. Other nuances are explained by an expert.

Yuri ShcherbinаЭкспертРуководитель юридического департамента Trade-in Realty.Знаете ли вы, сколько стоит ваше жилье?

Starting January 1, 2016, Russian citizens who sell an apartment owned for less than five years must pay income tax based on the cadastral, not inventory value. The increase in tax amount will be especially noticeable for owners of older housing in city centers built during the Soviet era, since these values can differ significantly.

Suppose the market value of a two-room apartment in a 'Stalin-era' building on Lenin Prospect, inherited in 2016, is about 8 million rubles. However, its cadastral value is estimated at 15 million rubles. When selling the apartment, the owner will have to pay 30% more: not 910,000 rubles as before, but over 1.2 million rubles in income tax.

What if your property is located within the Boulevard Ring and its market value differs from the cadastral value by dozens of millions of rubles? In such a case, it becomes very unprofitable for the owner to sell the apartment since nearly half of the honestly earned proceeds will go towards tax payments.

What steps should a property owner take if the data from Rosreestr is inflated compared to the actual value of your apartment? An independent expert appraisal can help. Preparing such a report will take 5–10 days, and the service cost starts from 5 thousand rubles. Residents of the same building can submit a collective appeal to prepare the report and receive a discount for a bulk order.

Cadastral value of real estate is generally higher than the actual market price, as the valuation was conducted at the end of 2014 when the price per square meter peaked. Having received the report in hand, you can either appeal to the commission for reviewing disputes about cadastral value at Rosreestr or directly file a lawsuit. The latter option is less favorable due to higher costs and longer duration (proceedings may last up to half a year).

In turn, the application to Rosreestr is reviewed within one month and provided free of charge. According to statistics, 40% of cases are contested at this stage, but only 20–25% of the cadastral value is successfully recovered by property owners.

If this option does not suit you or the Rosreestr commission rejects your appeal for any reason, you can still go to court. In this case, you will need assistance from a lawyer and, in addition to the expert's report, judicial examination of the property, which will incur additional costs.