How to sell your apartment. To pay, or not to pay personal income tax in 2017?

Director of Real Estate Legal Advisory Department at ACIG Property, Sergey Yerin, shares his viewpoint on this issue.

A physical person’s income is liable to personal income tax (PIT) at the rate of 13% when selling an apartment, or a part of it. However in some cases, PIT shall not be paid after a certain period of property ownership.

The term of the apartment ownership is determined by the registration date of the property ownership. This information can be found in a Certificate of State Registration of Rights to Immovable Property (apartment) or an extract from the Unified State Register of Real Estate.

There are two ways of PIT-taxation, depending on the term of property ownership when selling.

1. Exemption from taxation of PIT when selling an apartment, or a part of an apartment, which has been owned by the taxpayer for three years or more.

For example, if you are going to sell an apartment in 2017, which has been owned by the taxpayer for three years or more, then income from the sale of a property is not liable to PIT. Accordingly, PIT should not be paid in this case. In addition, you also do not need to fill out and submit a tax return.

2. Taxation of PIT when selling an apartment, or a part of an apartment, which has been owned by the taxpayer less than the minimum period.

If you have owned an apartment less than three years (property acquired prior to January 1, 2016), or less than the minimum period in accordance with Art. 217.1 of the Tax Code of the Russian Federation (acquired after January 1, 2016), then you should follow these steps:

• calculate tax;
• fill out a tax return;
• submit a tax return to the tax authority;
• pay PIT.

Art. 217.1 of the Tax Code of the Russian Federation contains information about the minimum period of property ownership.

• The three-year minimum ownership period will apply to real property acquired by one of the following methods: 1) inherited or under a deed of gift from a family member and/or close relative; 2) through privatization; 3) 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.

Sergey Yerin
Director of Real Estate Legal Advisory Department
ACIG Property
6/2 Presnenskaya Naberezhnaya, Moscow, Russian Federation, 123112
Tel.: +7 (495) 280-01-50 (#3671)
Mob.: + 7 (915) 348-99-88
E-mail: s.erin@acig.ru