The owners of shopping centers ask Mishustin not to apply the new base for taxing real estate

The owners of shopping centers, still reeling from the consequences of the pandemic and the departure of international brands, fear an additional increase in the burden on their business. This may happen after this year’s revaluation of the cadastral value, on the basis of which the taxable base for real estate is formed. The owners of retail space are asking the authorities not to take this step. Companies have already received concessions in the midst of a pandemic, but with the current budget deficit, the authorities, according to lawyers, are unlikely to meet business halfway.

At the disposal of Kommersant was a letter from the Vice-President of the Union of Shopping Centers (STC) Pavel Lyulin dated May 23 to Prime Minister Mikhail Mishustin with a request not to apply the new base for taxing real estate, obtained during the revaluation of the cadastral value this year, if it is higher the previous one. The government confirmed to Kommersant that they received the letter and sent it for consideration to the Ministry of Finance and Rosreestr. The Ministry of Finance and Rosreestre stated that the received appeal from the STC is being considered.

The Ministry of Finance approved the transfer by 2025 of the tax base of all real estate without exception, based on their cadastral value, which is almost equal to the market value. Now, while part of the property of companies, such as warehouse complexes, is taxed on the basis of its book value. In 2022, the authorities have already reassessed the cadastral value of land, and this year they have taken up real estate.

The new cadastral value of shopping centers will be used as a tax base from January 1, 2024. STC notes that when revaluing it, only the cost approach will be applied based on the cost of building the facility, without taking into account the comparative and income methods. The STC fears that the use of an exclusively costly method will lead to an increase in the cadastral value of objects, since building materials have become more expensive in recent years. According to Rosstat, in 2020, prices for building materials increased by 2.82% year-on-year, in 2021 – by 19.86%, in 2022 – by 13.9%. Consequently, the tax burden on the owners of such facilities will also increase, which is critical for them after the fall in revenue during the pandemic and the departure of international brands from the country, the STC notes. Rosreestr told Kommersant that budgetary institutions involved in cadastral valuation choose methods independently and with justification. The department also explained that each region sets its own property tax rates – now the maximum is 2%.

The problem with the increase in the taxable base will affect not only the owners of shopping centers, but also other commercial real estate objects, warns Pavel Lyulin. Many of these facilities are now declining revenue and the increase in tax costs could adversely affect their owners up to the bankruptcy of entire companies, he adds. Remain Managing Partner Dmitry Klapsha notes that office real estate is also taxed at the cadastral value and often 70-90% of property owners try to challenge it in court. According to the results of the revaluation in 2023, the situation may repeat itself, he adds. However, reducing the cadastral value in this way may now be more difficult due to the tightening of the rules for challenging it in 2020, says Platforma.Legal partner Dmitry Maltsev.

Given the trend of strengthening and increasing tax control, the authorities are unlikely to take such measures, since the increase in the cadastral value of objects implies an increase in the amount of tax that will go to the treasury, says Vasily Malinin, partner at the law firm Rustam Kurmaev and Partners. In addition, companies have already received tax breaks. For example, during the pandemic, the Moscow Mayor’s Office has already introduced a moratorium on revaluation in 2020-2021 to mitigate economic losses, recalls Dmitry Maltsev.

Now the authorities are in dire need of replenishment of the budget. According to the results of January-April 2023, the treasury received a deficit in the amount of 3.424 trillion rubles. This is already 843 billion rubles. exceeds the calculations of the Ministry of Finance, which expected that for the whole of 2023 the deficit will be 2.925 trillion rubles, or 2% of GDP.

Daria Andrianova