How to challenge a land tax?
K. I. RUSAKOMSKY IN FEBRUARY ISSUE OF «THE CORPORATE LAWYER» MAGAZINE
How to challenge a land tax?
Expert: Kliment Rusakomsky
Managing partner of Legal Group Paradigma
The land tax has considerably raised as a result of revaluation of cadastral value of real estate not so long ago. Formally taxable base hasn't changed. But the order of a cadastral appraisal which basis was formed by the data on the market-value of lands. It counted by the mass method excluding the accounting of specific features is reconsidered. As a result the cadastral value of the majority of real estate objects has considerably grown.
The "new" cadastral value of real estate objects and the tax burden calculated on her basis became unpleasant surprise for many people. Procedure of realization of the state cadastral valuation of lands (further – SCV) according to the legislation on estimated activity is opaque, and owners can't affect her results during an assessment. But this inconvenience is covered by an excellent opportunity by means of the mechanism of a cadastral appraisal to serve fiscal function of the state. There was quite successfully as practice has shown.
There was a question of change of cadastral value of the land plots (further – LP) in this regard before owners. For what it is necessary to challenge results of SCV.
The special commissions are created for the appeal of results of determination of cadastral value of the LP (The Federal law from 7/29/1998 No. 135-FZ "About valuation activity in the Russian Federation") (further – the Law No. 135-FZ). Rules of their creation and the principles of activity are described as creation and work of the commission on consideration of disputes on results of determination of cadastral value (утв. The order of the Ministry of Economic Development of the Russian Federation from 5/4/2012 No. 263). Functioning of the commissions doesn't interfere with the direct appeal of owners to courts. However for legal entities the appeal to the specified commission before filing of a complaint is obligatory.
The Legislator has provided two bases for the appeal of results of determination of cadastral value (Art. 24.18 of the Law No. 135-FZ):
- the unauthenticity of data on a real estate object;
- the establishment concerning a real estate object of market value.
The last basis provides to owners chances for reduction of tax burden. According to the land legislation the cadastral value of the LP is established on the basis of results of SCV of lands, but in the presence of data on market value cadastral admits equal to it. The informing order of government bodies about the market value of the land is realized in the mechanism of consideration of disputes on results of determination of cadastral value (Art. 24.18 of the Law No. 135-FZ).
Tenants who can submit the requirement about revision of cadastral value in case of establishment of a rent depending on the cadastral value of real estate, and also in the presence of the written consent of the owner of object to revision of cadastral value have these rights. This rule belongs only to the objects which are in property of individuals or legal entities.
So, owners and interested persons have the right to address to the commission if results of determination of cadastral value of real estate have affected their rights and duties. Increase in tax burden – the unconditional basis for contest. Besides the statement it is necessary to submit a package of documents for review by the commission:
- certificate of the cadastral value of the LP;
- certified copy of the title document;
- report or expert finding on determination of market value of the LP;
- positive expert finding on verification of the report on determination of market value of the LP on compliance to the legislation.
Refusal not a sentence
We will remind that legal entities can appeal to court with the statement for establishment of cadastral value only after refusal of the commission in her revision or the expirations of the put term for consideration of the application of the owner. At the same time the decision of the commission on a rejection of the statement for revision of cadastral value can't be a subject of judicial challenging. There was a wrong conclusion about impossibility of contest of the decision of the commission on refusal from this situation sometimes.
Challenging of results of determination of cadastral value is understood as presentation of any requirement. Which result of satisfaction change of cadastral value of real estate objects will become possible, including contestation of decisions and actions (inaction) of the commission on consideration of disputes on results of determination of cadastral value (item 1 of the Resolution No. 28). Another thing is that filing of application about establishment of cadastral value will allow to enter quicker changes in the state register, passing process of pronouncement of the new decision by the commission on the basis of the judgment which has come into force.
There was already a jurisprudence on this problem. In most cases courts meet claims of applicants. But there are nuances about which owners have to know. We will separately notice that in connection with entry into force of the Administrative Procedure Rules of the Russian Federation all cases of contestation of results of determination of cadastral value are subject to consideration by courts of law. Though earlier they could be considered also by arbitration courts.
Practically on all studied cases in which requirements of the applicant have been satisfied the expertize was carried out (solutions of SC of the Republic of Tatarstan from 3/17/2015 in the case of No. 3-25/2015, SC of the Republic of Bashkortostan from 4/15/2015 in the case of No. 3G-146/2015, the Volgograd regional court from 4/28/2015 in the case of No. 3-178/2015, the Moscow regional court from 7/2/2015 in the case of No. 3-19/15, M-277/2014, 3-151/2014). Applicants to whom expenses on carrying out examination were assigned were her initiator most often. Thus, expenses of applicants (especially legal entities which should address previously also in the commission) can be considerable. Besides carrying out forensic they should pay services in preparation the report on an assessment and the expert findings for his check on compliance to the legislation. Some courts regard not carrying out obligatory actions by applicants as non-execution of the duties. It is assigned to them that deprives of them the right for compensation of court costs for carrying out examination.
Requirements of the applicant about determination of a cadastral value of real estate object have been satisfied according to market. However recovery court costs on carrying out forensic examination from the defendant it is refused. The reason was that the applicant at the appeal to the commission hasn't carried out expertize of the report on an assessment and determination of cadastral value (The resolution AC of East Siberian Federal District from 6/16/2015 to No. F02-2628/2015, F02-2633/2015 in the case of No. A74-4468/2014).
The process is complicated by an uncertainty of Art. 24.18 of the Law No. 135-FZ regarding the list of the subjects obliged preliminary to address to the commission. There is specified in purview that individuals can appeal directly to courts with statements for contest, and legal entities submit previously the application to the commission. Before issue of the Resolution No. 28 courts held the opinion on distribution of a duty of the preliminary appeal to the commission and on individual entrepreneurs. But the formulation of item 10 of the Resolution No. 28 is unambiguous: the obligation of the pre-judicial appeal doesn't extend to SP.
In some cases courts didn't meet the requirement because the market value of a real estate object determined by forensic exceeds demanded by the applicant. But similar practice has been recognized not responding to the legislation (The resolution AC of the Moscow district from 10/22/2015 as No. F05-2497/2015 in the case of No. A40-146057/13).
The most common causes of refusal:
- discrepancy of the report on determination of market value of a real estate object to the legislation (The decision of the Leningrad regional court from 3/2/2015 in the case of No. 33-APG15-11);
- discrepancy of the expert finding on compliance of the report on establishment of market value to requirements of the law (The decision of Irkutsk regional court from 2/9/2015 in the case of No. 66-APG15-11).
Practice of the Moscow city court is remarkable in this regard. In reports on determination of market value of real estate objects contradictions and contentious clauses are tried to discover. It is rather easy taking into account their considerable volume. The conclusions about inconsistency of the submitted reports for determination of market value of real estate objects are concluded on the basis of the shortcomings which are independently revealed by the judge. At the same time the measures to purpose of forensic aren't taken (decisions of the Moscow city court from 8/13/2015 in the case of No. 3-444/2015, from 8/18/2015 in the case of No. 3-481/2015, from 8/19/2015 in the case of No. 3-475/2015).
At such approach the procedure of judicial contestation of cadastral value turns into fiction. Any report containing estimated judgments and operating with special terminology can be randomly recognized unreasonable. For prevention of refusal in allowance of the application on this basis applicants should resort to carrying out forensic.
Data on the market value of a real estate object are considered when determining taxable base since January 1 year in which the application for contestation of cadastral value has been submitted. Therefore, the new size of cadastral value won't be considered when determining taxable base for the previous tax period (as a rule, it is calendar year). It means for the taxpayer that at filing of application not that calendar year for which the tax sum is calculated it is necessary to pay a tax in the increased size according to the cadastral value determined as a result of SCV.
Most of taxpayers – individuals often just don't know about change of cadastral value. As the norm on date of the accounting of the determined market value is formulated crafty and with obvious calculation on similar lack of information.
Thus, owners have appeared in quite unattractive situation on favor of the state. Actually the burden of correction of the state mistakes which besides is accompanied by essential expenses is assigned to them. And that the most sad, costs it is necessary to incur with an enviable regularity. Frequency of carrying out SCV at least once in five years is established by the legislation. But the choice is small: to reconcile or try to challenge cadastral value and to pay less taxes before the following revaluation. And therefore prospects and ways of the appeal need to be estimated individually in each case.