What is the real estate sales tax?

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The procedure for calculating and collecting real estate tax is declared by the relevant code. Laws change from year to year. At the same time, the rights and obligations of citizens in the field of taxation are changing. The fact that remains unchanged is the need to pay tax.

What is the real estate sales tax?

Property of real estate may be held by a private individual, a private enterprise or a municipal authority. Types of real estate include different options: residential premises, commercial premises (retail or office buildings), industrial premises, land and agricultural land. The owner may have the right of sole ownership or as part of a share. In all cases, if the transaction falls within the description of taxable, the real estate sales tax remains mandatory.

The control system is carried out by the tax authorities and their territorial divisions. Factpayment or non-payment of tax is reflected in the annual declaration submitted by citizens.

General Principles

According to Russian law, any kind of officially received profit is taxed. From this point of view, the alienation of real estate is considered to be in favor of the owner. Therefore, it is the seller who is obliged to pay tax on the sale of real estate.

Article 224 of the Tax Code of the Russian Federation states that the amount of proceeds from the alienation of real estate should be taxed at a rate of 13%. However, this law does not apply in all cases. Details will be discussed in this article.

Another law to refer to is Federal Law number 382. It has been relevant since the beginning of 2016. According to the rules of this law, the tax on the sale of real estate in the legal field is based on the terms of ownership. This document considers two types of tenure by duration:

• Transfer of property ownership until 2016.
• Property owners whose rights are fixed after 2016-01-01.

The first category of citizens when alienating real estate is guided by the provisions of the law in force until the beginning of 2016. According to this law, the tax is mandatory for all owners who alienate real estate within the first 3 years after the transfer of ownership. For the second category, there is a new procedure, according to which the reference period of ownership is 5 years.

Who can not pay?

If we consider the general procedure for collecting taxes, the law providescircumstances in which the tax on the sale of real estate for individuals becomes irrelevant regardless of the period of ownership. In particular, the way of transfer to the property is considered. These are the following cases:

1. When the property goes to the owner on the condition of a lifetime dependency of the former owner.
2. Inherited property.
3. Alienation of real estate objects, the right to which arose as a result of privatization.
4. The basis of ownership is a donation agreement.

If the title document falls into one of these categories, then the transaction should not be classified as additional income and, accordingly, be taxed.

There are also features by region. As you know, domestic laws are divided into federal and territorial. Local authorities have the right to adapt some federal laws without fundamental contradictions. In practice, circumstances for a certain category of citizens are usually alleviated in this way. Real estate sales tax is no exception.

For example, for the Khanty-Mansiysk Okrug there is a law according to which income from the sale of real estate is not taxed even during the first 3 years of ownership. Similar rules apply in the Stavropol Territory: here the term of taxable transactions has been reduced from 5 to 3 years. To find out what tax on the sale of real estate should be paid in a particular region, you need to follow changes in territoriallaws.

How to calculate?

Citizen S. A. sold a house bought 1.5 years ago for 6,300,000 rubles. His case in all respects fits the definition of the law. He is officially employed, and his work experience is more than 10 years. What will be the amount of tax on the sale of real estate for a citizen of S. A.

To prepare a declaration for the year, you need to take the following information:

6,300,000 – 1,000,000=5,300,000 – tax base amount

Tax amount: (6,300,000 - 1,000,000) x 13%=689,000 rubles

But long before the deadline for filing the declaration, S. A. collected documents for the deduction and received confirmation from the tax service. The amount of the deduction was the maximum. Now the calculations look different:

(6,300,000 - 5,300,000) x 13%=130,000 rubles actual payment amount.

If a citizen of S. A. made a deal 5 years after the purchase, he would be included in the exempt category.

For individuals

The tax on the sale of real estate for individuals, its features and payment procedure is declared by Chapter 23 of the Tax Code of the Russian Federation. Thus, subjects of law with the rights to receive income in the territory of the Russian Federation are divided into three categories:

1. A resident of a country is a citizen who has lived in Russia for at least 183 days during the last year.
2. Non-residents - persons who do not fall into the previous category.
3. Conditional definition - currency residents are citizens of the Russian Federation who have been living in another country for the last year, but visiting Russia at least once a year.

When real estate is sold by a non-resident, taxes and the procedure for their calculation are regulated by Article 209 of the Tax Code. So, a separate set of personal income tax collection is applied for them.

For legal entities

When a legal entity alienates real estate on its own balance sheet, the procedure for calculating taxation is largely determined by the chosen tax system. But certain is the fact that by selling real estate, a legal entity receives income. Accordingly, this income should be reflected in the balance sheet of the company. We continue to consider the tax on the sale of real estate. From what amount and in what order should a legal entity pay it? It is necessary to take into account belonging to one of the following tax regimes:

1. UTII.
2. Simplified system.
3. Patent system.

The type of property is also taken into account. It can be residential, commercial, land or subsoil.

Factual information and form of ownership are also relevant: does the company conduct commercial activities in fact, are the founders residents or non-residents of the Russian Federation? To answer all these questions, one should be guided by Article 23 of the Tax Code of the Russian Federation.

When selling a dwelling by a legal entity, income is not subject to VAT, but income tax is mandatory. The income tax rate also depends on the civil status of the founders (residentor non-resident). If we are talking about the alienation of non-residential premises that are on the balance sheet of the enterprise, then the amount of income is subject to both income tax and VAT. At the same time, income tax is charged not on the amount of the transaction, but on the amount of net income.

An important caveat: the tax on the sale of commercial real estate does not take into account the number of years of ownership. Another nuance from the field of tax optimization says that the company has the right to reduce the amount of income by the residual price of the object. If, after accounting calculations, the difference between the transaction amount and the final amount turns out to be negative, then the figure is classified as a loss for the enterprise.

Should pensioners pay?

Does the tax on the sale of real estate of individuals - pensioners and other special categories of citizens apply? According to the current laws, tax incentives or reliefs tied to the social status of citizens are not provided. Retirees must pay tax if they fall under the general category of taxable persons.

It is important to distinguish between property tax and personal income tax. Property tax since 2014 is not relevant for pensioners. An exception is when a pensioner uses real estate for profit. Otherwise, they are subject to the general procedure: a tax on the sale of real estate for 3 years will be mandatory for them.

But pensioners have the opportunity to significantly reduce the tax or even be exempt. To do this, they must resort to a property deduction. Until 2012, the deduction did not apply to pensioners. The adoption of Federal Law No. 330 provided them withsuch a right.

Through this law, retirees can receive one of the following tax deduction options after the sale of real estate:

• If the ownership was fixed more than 3 years ago, then they are completely released on a general basis.
• If the holding period is shorter and the value of the object does not exceed 1 million rubles, they can receive a reduction in the tax base to the amount that was spent when purchasing the object.

Deductions

Subjects of taxation are en titled to a property tax deduction. It applies to those citizens who are officially employed and deduct income tax or personal income tax in the amount of 13% from their income. There are three deduction options:

• Total release.
• Partial.
• Charging tax on the entire amount of revenue.

At the same time, the maximum amount by which the amount of tax can be reduced is 1 million rubles.

Example: a citizen sells an apartment bought 2.5 years ago for 4,500,000 rubles. By the time the declaration was submitted, the citizen had also prepared documents for the deduction. He was en titled to the maximum deduction. As a result, the amount of the tax base for him was 3,500,000 rubles, and taxes - 455,000 rubles.

When answering the question of what tax should be paid on the sale of real estate, it is important to mention the option of joint ownership. If the ownership of real estate extends to several people, then the obligation to pay tax is also distributed depending on the share of eachof them. Or co-owners can agree among themselves and incur a tax liability in a different order.

Citizens can use the deduction more than once, as it applies to each unit of the transaction. But within 1 year, only one deduction is allowed. Thanks to this relief, the amount of tax on the sale of real estate can be significantly reduced.

There are three methods for implementing the deduction:

• Disbursement of due funds in cash.
• Transfer to the recipient's bank account.
• Issue a notice to the employer indicating the exemption of the citizen from paying personal income tax for the period during which the due amount has accumulated.

How to apply for a deduction?

An application for a deduction is made during the reporting period in which transactions were made. The deduction can be received in two forms: a fixed amount or an amount equal to the costs. The choice depends only on the applicant: he can first calculate which option is more profitable for him and apply for that particular type.

The deduction is appropriate when a citizen needs to prove the costs of the previous purchase of real estate that was sold in the reporting period. Therefore, these expenses will have to be secured with copies of documents for them. For these purposes, copies of the following documents are submitted to the tax authority:

• Agreement on the acquisition of real estate (purchase and sale).
• Document confirming the use of the services of real estate companies.
• Act of acceptance and transfer duringpossession.
• Documents from the seller on receipt of money: a receipt (if the money was received in cash) and a bank statement (if the money was transferred to the account).
• Payment orders.
• Other documents generated in the course of transactions and representing financial value.

After confirming the application for a deduction by the tax authority, you should again return to the issue of real estate sales tax. How much should you pay? The tax base will be significantly reduced. It is important to note that deductible expenses do not include insurance payments and mortgage repayments.

Aims of law and practice

Once citizens become aware of the taxes on short-term property sales and figure out the tax rates, they may unwittingly become interested in legal savings options. To answer, you should pay attention to the original purpose of introducing this tax.

It was believed that the motive of the owners of a quick sale after the purchase is the desire to capitalize on the difference. Everyone remembers the pre-crisis times, when real estate prices grew dynamically, and the state did not have direct leverage. From this point of view, this tax plays the role of an indirect tool for controlling the real estate market. And rightly so, because at too high real estate prices, as a rule, only a certain social stratum will always benefit at the expense of others.

But consider another case: citizen M. S. needs to expand his housing, he is also not averse to moving closer to the central part of the city,but does not own funds. He finds a compromise: sell the only housing, temporarily live with his family with his grandparents and take out a mortgage on more suitable housing. Everything went according to plan, but then the crisis of recent years made its own adjustments. The owner was among those 20% who failed to return the funds. Despite the efforts of the borrower, refinancing in another bank did not take place.

The only right decision was to sell the property before the bank sells it from an open auction. As a result, the citizen loses funds in the form of mortgage interest rates and pays sales tax. If the cost of housing has changed, then perhaps he will no longer be able to buy an apartment. And this is not an isolated case.

At the stage of discussion of the bill, the possibility of releasing those persons whose property for sale is the only one was discussed. But legislators had concerns that speculators could take advantage of this provision when they find out what tax the sale of real estate is subject to.

Can I not pay?

It is possible to optimize the tax amount in addition to the deduction. In addition to the cases considered by law, there are other options:

Providing documentation of expenses incurred. This position is also officially permitted. For example, even if a person bought a property for the purpose of further sale, then the amount of his income is not equal to the entire cost of the transaction. Only the difference between the amount bought and sold is recognized as income.value

Expenses are: the cost of the object, the cost of expansion, the repayment of existing debts for utilities, the installation of networks and permitted types of redevelopment, improvement of landscaping and other repairs.

• Application of double deduction. Asking the question of how much is taxed on the sale of real estate, one should also take into account the legal status of the taxpayer: in the framework of this type of taxation, he is both a seller and a buyer. Another important condition is the completion of two transactions (purchase and sale) within one calendar year. And finally, the third condition is if the purchase was made earlier than the sale. That is, only those who have this is not the only housing have optimization opportunities. If the deduction was not claimed when buying the first apartment, now the obligation can be written off at its expense, regardless of what tax on the sale of real estate is to be paid to the budget.
• Application of a reduction factor. According to the terms of Article 217 of the Tax Code of the Russian Federation, the amount equal to the multiplication of the reducing factor by the cadastral value is considered income. In this case, it is even possible to reduce the tax base to zero.

If the status is self-employed?

If a private entrepreneur sold real estate before he officially registered as an individual entrepreneur, then the transaction takes place in the tax authorities in the form of a regular personal income tax declaration. If at the time of the transaction the seller had the status of an entrepreneur, then a logical question arises: how much taxes will have to be paid on the salereal estate IP?

Here it is important to consider whether the property is listed in the OKVED code as the main means of commercial assets that generate income or not. The second determining factor is the IP taxation system. There are two types: STS - a simplified system and the “income minus expenses” method.

In the first case, the transaction amount is added to the general base for tax calculation. The payable tax rate is 6%. Under the “income minus expenses” system, the amount of the transaction increases the amount of profit. But in terms of expenses, it is important to take into account the cost of purchasing an object and the funds spent on its maintenance and improvement of conditions. As evidence for the purchase, a copy of the title documents should be made in advance and subsequently submitted to the tax office.

In case of IP liquidation

Let's consider the case when a business entity stops its activities and liquidates the IP status. What taxes are paid when selling real estate in this case? The entrepreneur is not subject to the 3-year rule, and he is obliged to pay income tax to the budget as an individual who has received additional income. Experts recommend preparing for the liquidation process in advance, first switching to a simplified taxation system. This method significantly reduces costs. From the point of view of tax optimization, it is advisable to sell real estate in the status of an individual, and not an individual entrepreneur.

Due date

At the end of each year, business entities and individuals working in the officialbasis, must provide information on the movement of financial resources at their disposal. In this regard, the question becomes relevant: when selling real estate, what tax to pay, so that later there will be no claims from the tax authorities.

Individuals submit a report in the form of 3-personal income tax before April 30 of the year following the reporting period. The filing authority is the local division of the IFTS authority. If the document contains errors of a technical nature or related to erroneous calculations, the tax authority will not accept the report. You cannot edit an existing document. The corrected report is issued on a new form, on the title page of which there will be information about the retake. The document is generated in two identical copies. After the receipt of the report, a period is allotted for the payment of the amount of tax. This period usually lasts until July 15 of the year in which the report was submitted.

Failure evasion and late submission of reports are penalized:

• For not providing zero indicators - from 1000 rubles.
• In other cases - up to 30% of the accrued tax amount.
• If the tax is not paid on time, the amount of the tax is collected plus 20-40% of its amount as a pen alty.
• In addition to the main sanctions, pen alties are charged for each day of delay.

Therefore, it is important to take a responsible approach to tax and legal obligations. On a national scale, the life of the whole country depends on taxes.