Tax Flash Report
by PwC experts
Tax exemption on real property sales:
rules to change in 2016
December 2014 / Issue No. 43
In brief
Russian lawmakers have changed the personal income tax (PIT) rules for income from sales of
apartments, houses and other types of real property.
Generally, taxpayers will be eligible for the full PIT exemption on such sales if they have owned the
relevant property for five years or more. In a limited number of cases, the PIT exemption can be
claimed by taxpayers who have owned a relevant property for three years if the property was inherited
or received as a gift from family members or close relatives. As previously, the exemption will be available
only to individuals Russian tax residents.
Understating the sale price in the sale-and-purchase agreement will not help to significantly reduce the
PIT amount due. The contractual sale price will be compared against the property's cadastral value
multiplied by a special ratio, and the greater amount will be used for tax purposes.
These latest changes will take effect on 1 January 2016 for properties acquired after that date.
In detail
Current benefits
The current version of clause 17.1, Article 217 of the
Russian Tax Code exempts from PIT income received
by individuals (tax residents) from sales of property
that the taxpayer has owned for three years or more
(except for securities and property used in business
operations).
If the ownership period is less than three years then,
under Tax Code Article 220, the taxpayer may take a
fixed-amount deduction of RUB 1 million upon the sale
of specific types of real property, or RUB 250,000 upon
the sale of other types of property. Alternatively, the
property acquisition cost may be deducted from taxable
income.
Benefits that will be available starting in 2016
Tax Code Chapter 23 will be supplemented with a new
article (Article 217.1) dealing with taxation of real
property sales. Article 217.1 will introduce the concept
of the "minimum period of ownership of a real property
item". After this period, income from the sale of such
property would be PIT-exempt.
The three-year minimum ownership period will apply to
real property acquired by one of the following methods:



inherited or under a deed of gift from a family
member and/or close relative;
through privatisation;
by a taxpayer who pays rent due to the transfer of
the property under a life estate agreement.
In all other cases, the minimum ownership period is
five years.
Russian Federation constituent regions may at their
discretion reduce (down to zero) the minimum
ownership period for all taxpayers, or specific
categories of taxpayers.
Sale of a property owned for less than the
minimum ownership period
If the ownership period for a real property is less than
the minimum ownership period, the individual may
www.pwc.com
make deductions as stipulated under the new version of
Tax Code Article 220.
value) multiplied by 0.7, then the latter value is deemed
the taxable income.
For the most part, the procedure for taking a fixedamount deduction remains unchanged and the
maximum amount will remain RUB 1 million for sales
of residential houses, apartments, rooms and some
other real properties, and up to RUB 250,000 for sales
of other types of property (except for securities and
property used in business operations).
Russian Federation constituent regions may reduce the
above declining ratio at their discretion.
In practice, some sellers may understate the real
transaction value by indicating an amount up to RUB 1
million in the sale-and-purchase agreement so as to
take the full deduction and avoid paying PIT on income
from the sale.
Thus, if an apartment was purchased before this date
and was owned for at least three years, it could be sold
without any tax consequences after 2015.
However, once these latest changes take effect, the
ability of sellers to understate the tax base will be
severely limited.
Please note that all of these exemptions and deductions
apply to Russian tax residents in the year of the
property sale. Also note that the new rules apply to real
property acquired after 1 January 2016.
What does this mean for you?
Taxpayers should plan any future real property
transactions so as to take into account the impact of
these new rules.
Under the new rules, if the taxpayer's income from the
sale of real property is less than the property's cadastral
value (which, in turn, must closely match the market
[1] Federal Law No. 382-FZ of 29 November 2014 "On Amending Parts I and II of the Russian
Federation Tax Code"
Contacts
We would be happy to answer your questions.
Human Resources and International Assignments Services
Karina Khudenko
Partner
[email protected]
Evgeny Sivoushkov
Director
[email protected]
@ru.pwc.com
© 2014 All rights reserved. PwC and PricewaterhouseCoopers refer to PricewaterhouseCoopers Russia B.V. or, as the context
requires, other member firms of PricewaterhouseCoopers International Limited, each of which is a separate legal entity.
The information contained in this flash report does not constitute professional advice. PwC is not responsible for any damages that
may be incurred by any parties if their actions or failure to act were based on their reading of this flash report. For assistance with
specific questions, we advise that you contact a PwC professional in the relevant line of service.