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Amendments in taxation of real estate properties in 2016

11 January 2016

The Law of December 30, 2015 No. 343-3 “On Amendments and Additions to Certain Laws of the Republic of Belarus on entrepreneurial activity and taxation issues” (hereinafter - the Law) that introduced significant amendments to the Tax Code of the Republic of Belarus (hereinafter - the TC) has come into force since January 1, 2016, including chapters 17, 18 which regulate issues of calculation and payment of real estate tax and land tax.

Analysis of the main amendments

Real estate tax

1. The list of real estate tax concessions has been abridged

1.1. The use of the concession in respect to the commissioned capital constructions has been restricted.

The Law establishes limitation in application of the concession that provided for tax exemption for the first time commissioned capital structures (buildings, constructions) within one year from the date of their acceptance into service. Since January 1, 2016 this exemption cannot be applied to capital structures (buildings, constructions), which exceeded the construction period established in the project documentation.

1.2.  The list of properties in respect of which exemption  from real estate tax has been abridged.

The approach to the application of real estate tax concessions on capital structures (buildings, constructions) which are used as social and cultural objects has been changed. Earlier, social and cultural objects were exempt from real estate tax. Moreover, in connection with the absence of the “social and cultural object” definition in legislation, when applying this concession tax bodies used the approach specified in clauses. 9.4.4 of The Principal directions of the socio-economic development of the Republic of Belarus for 2006 - 2015, approved by the Resolution of the Council of Ministers of the Republic of Belarus as of November 4, 2006 No. 1475 according to which the branches of socio-cultural sphere are health, education, culture, physical culture, sport and tourism.

On January 1, 2016 the Law establishes an exhaustive list of objects that are exempt from real estate tax. In particular, they include:

- buildings, facilities of state housing and housing of non-state organizations;

- buildings used in the spheres of education and health;

- facilities included in the register of sports facilities;

- buildings, structures of cultural organizations, treatment centers and health care organizations.

Thus, the concession that was in force before in the form of exemption from real estate tax on capital structures (buildings, constructions) used in the tourism sector no longer applies.

1.3. The concession on real estate tax in respect of objects of roadside service has been cancelled.

Earlier, roadside service facilities were exempt from real estate tax for two years from the date of commissioning.

2. The list of objects of taxation by real estate tax has been changed

2.1. Obligatory payment of the real estate tax in respect to one-family houses and apartments, leased by an individual with the right of redemption.

Since January 1, 2016 the objects of taxation by real estate tax also include one-family houses or apartments, located in the territory of the Republic of Belarus and taken by an individual on a financial lease (leasing) under a finance lease (leasing) agreement providing for the redemption of the leased asset. The payer of the real estate tax in this case are individuals-lessees, starting from the 1st day of the first month of the quarter following the quarter in which such a transfer has taken place. Accordingly, starting from that date, the obligation of the organization-lessor to calculate and pay real estate tax terminates.

2.2. Exemption from real estate tax on installations and transfer devices.

Objects of taxation will no longer include capital structures (buildings, constructions), their parts, classified in accordance with the legislation as the installation and transfer devices for the purpose of determining the standard service life of the fixed assets and not recorded in accordance with the legislation in accounting records as a part of fixed assets and interest-bearing investments in tangible assets.

The list of objects that are regarded as installations and transfer devices for the purpose of determining standard service life is established by the Resolution of the Ministry of Economy of the Republic of Belarus of 30.09.2011 No. 161.

Prior to the entry into force of the Law, all installations and transfer devices were equated to capital structures and, accordingly, were subject to real estate tax, irrespective of the accounts in accounting records on which such installations and transfer devices were recorded.

3. The procedure for taxation of real estate objects included in the list of unused (used ineffectively) property has been changed

The real estate tax concessions established by the TC in respect of certain categories of objects no longer (since January 1, 2016) relate to the real estate objects included in the list of unused (inefficiently used) property, annually approved by the regional (Minsk city) Councils.

Real estate tax on such capital structures is calculated at higher rates. Thus, the regional (Minsk city) Councils have the right to increase (but not more than by 10 (ten) times) the real estate tax rate on unused (inefficiently used) capital structures (buildings, constructions), included in the corresponding list. Previously, the tax rate could be increased by not more than 5 (five) times.

At the same time, unlike the previous procedure, calculation and payment of the real estate tax at higher rates is made from the 1st day of the first month of the quarter following the quarter in which the regional (Minsk City) Council decided to increase the tax rate, but not from the 1st of January of the year following the year in which the corresponding decision was taken.

In addition, the amount of the real estate tax charged on capital structures (buildings, constructions), their parts, included in the list of unused (inefficiently used) property, is not to be included by organizations and individual entrepreneurs in the cost of production and sale of goods (works, services), property rights  taken into account  for taxation purposes.

4.  Real estate tax rate in respect to apartments has been changed

Real estate tax rates payable by individuals (including individual entrepreneurs) for the second and subsequent apartments located in apartment buildings and (or) townhouse and belonging to them on the right of ownership have been doubled (from 0.1% to 0.2%).

Land tax

1. The list of concessions in the form of exemption from the land tax has been changed

1.1. The list of land lots of organizations carrying out social and cultural activities exempt from the land tax has been abridged.

Previously, the land lots of organizations engaged in social and cultural activities were exempt from the land tax.

When applying this exemption, the tax bodies used the approach embodied in the clauses. 9.4.4 of The Principal directions of the socio-economic development of the Republic of Belarus for 2006 - 2015, approved by the Resolution of the Council of Ministers of the Republic of Belarus as of November 4, 2006 No. 1475, according to which the branches of socio-cultural sphere are health, education, culture, physical culture, sport and tourism. In this connection, organizations carrying out activities in spheres of health, education, culture, physical culture, sport and tourism could apply the specified exemption. 

Since January 1, 2016 the Law has established a comprehensive list of organizations, land lots of which are exempt from land tax. In particular, among those exempt from land tax are the following:

- land lots of organizations carrying out activities in education and health spheres and receiving subsidies from the budget;

- land lots of organizations that receive subsidies from the budget occupied by capital structures (buildings, constructions), their parts, included in the register of sports facilities;

- land lots of organizations of the Federation of Trade Unions of Belarus carrying out activities in the education and health spheres, physical culture and sports;

- land lots of treatment centers and wellness organizations, youth sports schools, cultural institutions, regardless of the form of ownership.

Thus, since organizations carrying out activities in the sphere of tourism are not included in this list, the land tax concession cannot be applied to them in 2016.

1.2. A concession is established for land lots provided for the construction of objects included in the state investment program.

Land lots provided for organizations that construct at the expense of republican and (or) local budgets objects included in the state investment program, as well as in investment programs of regions and Minsk city are exempt from the land tax for the period of the construction of these objects.

1.3.  The list of non-taxable land lots where objects of alternative energy are located is specified.

In particular, since January 1, 2016 the following land lots are exempt from the land tax:

1) land lots occupied with the objects of fixed assets involved in the production or receipt (receiving), transformation, accumulation, and (or) transfer of electric energy produced by renewable energy sources;

2) land lots occupied by the reservoir storage used for power generation by hydroelectric power plants;

3) land lots allocated for the period of construction (reconstruction) of fixed assets referred to in clause 1-2.

Previously, the concession concerned only land plots occupied by objects and installations for the use of renewable energy sources, as well as land plots allocated for the period of construction (reconstruction) of objects and installations for the use of renewable energy sources.

2. The procedure for taxation of land lots occupied by the objects included in the list of unused (used ineffectively) property has been changed

A prohibition to use concessions in respect to land lots occupied by capital structures (buildings, constructions), included in the list of unused (inefficiently) used property has been established.

Regional (Minsk City) Councils have received the right to increase (but not more than by 10 (ten) times) the rate of land tax for land lots occupied by capital structures (buildings, constructions), their parts, included in the list of unused (inefficiently used) property. The calculation and payment of the land tax at higher rates is made from the 1st day of the first month of the quarter following the quarter in which the regional (Minsk City) Council decided to increase the tax rate.

Amounts of land tax, calculated at a higher rate are not to be included by organizations and individual entrepreneurs in the cost of production and sale of goods (works, services), property rights accounted for taxation purposes.

In addition, the norms of the TC specify the procedure for determining the area of land lots for the purposes of calculating the amount of land tax for land lots occupied with capital structures included in the list of unused (ineffectively used) property.

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