The privilege was lowered to the ground – Newspaper Kommersant No. 172 (7373) of 09/19/2022

A bill has been submitted to the State Duma that closes the legal gap in the personal income tax benefit granted to families with two or more children a year ago when selling real estate. Exemption from this tax, subject to the purchase of new housing, is proposed to be extended to income not only from the sale of the house, but also the land on which it is located. In this way, the owners of houses will be equalized with the owners of apartments and with those who sell their property in the general manner. The government supported the idea, although they pointed out that the expansion of the benefit would cause an uncalculated drop in regional budget revenues.

A bill correcting a clear error in the mechanism for applying a tax break launched a year ago for the sale of housing by families with at least two children was submitted to the State Duma by deputies Vasily Piskarev and Grigory Shilkin. The government, which happens infrequently, generally supported the initiative of the parliamentarians.

The project proposes to exempt income from personal income tax not only from the sale of residential premises themselves, but also from land, when it comes to transactions primarily with private houses. Now, as a general rule, citizens are exempt from income tax when selling housing when owning it for more than three or five years (the period depends on a number of conditions). For families with two or more children, the tenure requirement does not apply if they bought other, more expensive housing in the same calendar year (with a cadastral value of up to 50 million rubles). At the same time, the benefit was established only for income from the sale of a room, apartment, residential building or shares in them. As a result, the land plot and the outbuildings located on it should be subject to personal income tax in the standard regime.

“However, it often happens that the cost of the land itself turns out to be higher than that of a residential building, therefore, the tax on income from the sale of the site is impressive, and the proceeds from the sale of the house are used to pay it off,” the authors of the project write. As a result, the deputies note, they cannot invest the entire amount received in improving the living conditions of families with children, and the main goal of the benefit is not achieved. After the adoption of the amendments, families selling houses will be equalized in rights with apartment owners who receive the entire amount in the transaction, as well as with those who enjoy exemption from personal income tax when selling a house with land in the general manner.

The White House, which conceptually supported the project, in its official response, proposed extending the exemption to outbuildings that are located on the site along with a residential building, as well as introducing a condition that in order to be exempted from personal income tax, all buildings and land must be sold simultaneously and not be used in business activities. At the same time, the government noted that the expansion of benefits would lead to shortfalls in budget revenues, the sources of compensation for which have not been determined. As follows from the financial and economic justification for the project, there are no statistics on the exemption, since taxpayers receiving it are not required to submit declarations.

Anna Zelenskaya, associate partner of the MEF law firm, notes that the amendments are aimed at “giving full benefits to those families who sell individual houses, it is clear that no one sells them separately from the land.” Tax Compliance junior tax consultant Yekaterina Kopylova notes that the new form of the benefit looks more consistent, given the goals set when it was introduced. However, adds Pavel Ickert, managing partner of the Ickert & Partners law firm, although the problem being corrected now can really complicate the plans of families, since they do not always know in advance about the collection of personal income tax from the site, in some cases the share of the tax exempted may be insignificant and will not always allow significant improve living conditions.

Evgenia Kryuchkova