The procedure for exempting individual entrepreneurs from paying property tax

Which individual entrepreneur can avoid paying property tax?

Individual entrepreneurs are regarded as individuals and according to the same scheme they pay property tax. Starting from 2019, individual entrepreneurs make payments only for real estate that:

• already refers to the housing stock - apartments, houses, cottages, if the building has a connection with the land;
• non-residential objects - garages, parking spaces;
• any other residential and non-residential finished buildings or those that are just being rebuilt, but are already registered as property.

At the same time, entrepreneurs on imputed income, patent or agricultural tax, do not pay for the real estate that is needed for work. For example, if they rented or bought an object for equipment, a workshop or a warehouse.

Those individual entrepreneurs who work on the main taxation system are required to pay real estate tax. Tax is also paid by simplified entrepreneurs if they have a store, retail space or office, as well as premises for the provision of services, which is included in the list of cadastral real estate.

In the Russian Federation, an entrepreneur has 5 taxation options when opening an individual entrepreneur:

• general taxation system - OSN;
• patent - PSN;
• simplified - simplified tax system;
• single tax on imputed tax - UTII;
• unified agricultural tax - Unified Agricultural Tax.

If the individual entrepreneur has not submitted an application to the tax service to change the tax regime, then according to the legislation of the Russian Federation he will work under the OSN.

To understand whether or not an individual entrepreneur should pay property tax, you can follow this rule:

1. There is no need to pay for real estate for work under a patent, imputation or agricultural tax. In a simplified way, you need to check whether the property belongs to the cadastral value or not. If not, then the individual entrepreneur does not pay tax; if yes, then he pays.
2. Entrepreneurs who operate under the basic taxation system are required to pay property taxes to the budget. It does not matter whether the property is included in the cadastral list or not.

Therefore, the tax regime and inclusion in the cadastre are the determining parameters.

Accepted payment procedure

Since the first of January two thousand and eighteen, changes have been made to the procedure for maintaining a journal, which takes into account all income and expenses incurred by a business entity. This journal must be maintained by all entities using the simplified taxation system. The need to change the procedure for maintaining this book is explained by the fact that many entities pay for trade books. The new edition of the magazine contains an additional section where information about current income is entered. Today, a separate accounting system is used. In the case when an entrepreneur uses a system where the tax base is the difference between income and expenses, the volume of trade fees is fixed in tax expenses.

Exemption of individual entrepreneurs using the simplified tax system from property tax is provided only for representatives of specific areas of business. It should also be noted that property tax is paid by entrepreneurs working under the simplified tax system only in cases where a specific asset is used in the course of business activities. However, there are a number of exceptions to each rule. Entities using the simplified tax system are required to make mandatory payments for those real estate properties that have a cadastral value. Based on the above, we can conclude that representatives of private businesses are required to pay the following taxes:

1. For property assets owned by them that are not used in commercial activities (on behalf of an individual).
2. For property assets owned by them, which are used in commercial activities and have a cadastral value (on behalf of the entrepreneur).

Quite often, entrepreneurs face various difficulties that hinder business development. To date, there is no regulation in tax legislation that determines whether assets belong to commercial or non-commercial activities . This means that the individual entrepreneur is the owner of all objects belonging to him, regardless of whether they are used in the work process. The tax service registers contain information that a specific individual owns certain property. Based on this information, a notice of the need to pay tax is drawn up. You must transfer money before the first of December of the year following the reporting period.

The specified tax must be paid by individual entrepreneurs who are under the general regime and have the corresponding object of taxation

How to prove that property is used in the activities of an individual entrepreneur

An entrepreneur does not need to prove that the property is involved in business activities. The tax service itself will establish this fact during on-site inspections. To be exempt from paying tax in this case you will need:

• submit an application in free form;
• describe real estate objects that are involved in business activities;
• indicate the tax regime option used.

Entrepreneurs entitled to benefits do not need to attach supporting documents. This procedure has been in place since 2018.

The use of special treatment is not included in the benefits.

By virtue of Art. 400 of the Tax Code of the Russian Federation, payers of property tax are individuals who have the right of ownership of property recognized as an object of taxation in accordance with Art. 401 of the Tax Code of the Russian Federation. The tax base for taxable objects is determined based on their cadastral or inventory value (Article 402 of the Tax Code of the Russian Federation).

According to Art. 408 of the Tax Code of the Russian Federation, the amount of tax is calculated by the tax authorities at the end of the tax period separately for each object of taxation on the basis of information submitted to the tax authorities according to the rules of Art. 85 Tax Code of the Russian Federation. The tax authority sends a notice to the taxpayer, and he is obliged to pay the amount specified in the notice no later than December 1.

This procedure is the same for all individuals, even if such a person has the status of an entrepreneur.

Therefore, if an entrepreneur expects to be exempt from property tax, he must take care to prove his right to exemption to the tax authority.

Article 407 of the Tax Code of the Russian Federation describes what an individual must do to receive a property tax benefit. You need to submit a statement about this to the tax authority of your choice (that is, not necessarily at your place of residence, for example, at the location of the property). At present, documents confirming the right to individual property tax relief do not need to be submitted; the tax authority must have the relevant information. But if he does not have these documents, including those not submitted by the taxpayer, the tax authority, based on the information specified in the taxpayer’s application for a tax benefit, requests information confirming the latter’s right to a benefit from the bodies, organizations, officials who This information is available (clause 3 of article 361.1, clause 6 of article 407 of the Tax Code of the Russian Federation).

But this procedure is provided for receiving the benefits listed specifically in Art. 407 of the Tax Code of the Russian Federation. By the way, it must be borne in mind that on the basis of clause 2 of the said article, these benefits are provided in relation to an object of taxation that is not used by the taxpayer in business activities.

And the fact that an individual entrepreneur has the right not to pay property tax by applying a special regime is not stated in this article, but in the relevant chapters of the code.

What does the tax amount depend on?

Regions independently set the property tax rate, since the payment applies to local ones. The tax amount is affected by the price of the property; the higher it is, the greater the payment amount. The highest rate in Russia is 2%. On the tax website you can find out what percentage is set for a particular object. You will need to enter the tax type, region and year for which you plan to pay real estate taxes.

From the beginning of 2021, property taxes are calculated based on cadastral value. This price is determined not by the owner himself or the market, but by a government agency. But the cost is not much different from the market price. Recalculation of the cadastral valuation of real estate takes place every 5 years. The obtained data is published on the Rosreestr website.

Until the end of 2021, in some areas and regions, the tax was based not on the cadastral value, but on the inventory value; it was calculated according to the degree of depreciation of the object. Now there is no such thing, and all real estate taxes in the Russian Federation are calculated in a single way - at the price indicated in the cadastre.

The tax rate for individual entrepreneurs or individuals will depend on the type of object, cadastral value and location. For example, for the Yaroslavl region for 2021:

No one needs to calculate how much they need to pay into the budget. The tax office sends a letter indicating both the deadline and the amount. The Federal Tax Service sends out notifications once a year, and payment must also be made in one payment before December 1 of the next year. That is, upon receipt of a letter on January 1, 2021 to pay tax for 2021, it must be paid no later than December 1, 2020. There is no need to report with a separate declaration or write a report.

Tax for companies using the simplified tax system

The property tax of organizations is regional. A tax period is defined for it - a year, as well as a reporting period - a quarter. That is, in the general case, an organization must pay an advance payment of real estate tax three times during the year, and after its completion make an additional payment. At the same time, the law allows regions not to set a reporting period.

Specific deadlines for tax payment are determined by the laws of the constituent entities of the Russian Federation. As a rule, this is given a month after the end of the reporting period.

Tax rates are also determined at the regional level, but they must fit within the maximums prescribed in the Tax Code. For payers of the simplified tax system in 2021 (since they pay corporate property tax on real estate assessed at cadastral value), the maximum rate is 2%. At the same time, there are a number of objects that are taxed at a zero rate.

The authorities of the constituent entities of the Russian Federation may introduce differentiated rates in relation to different real estate objects or for certain payers. For example, in Moscow for real estate assessed at cadastral value, in 2021 the rate was 1.7%, in 2021 it was raised to 1.8%. In 2022, the rate will be 1.9%, and from 2023 it will increase to a maximum of 2% (Moscow Law of November 5, 2003 No. 64).

Certain payers have benefits for real estate taxes - they are prescribed in Article 381 of the Tax Code of the Russian Federation. For example, these are manufacturers of pharmaceutical products, prosthetic and orthopedic enterprises, bar associations, research centers, Skolkovo participants. Benefits can also be introduced at the level of constituent entities of the Russian Federation.

Payment of property tax in 2021 for legal entities using the simplified tax system involves filing a declaration. This must be done once a year, the deadline is March 30 of the next year. Previously, it was necessary to submit reports for advance payments, but this provision has now been abolished.

How to calculate property tax for individual entrepreneurs

If the notification from the Federal Tax Service did not arrive until October of the current year, and the individual entrepreneur knows that he must pay property tax, then it is better to request a second notification yourself. Or at least check whether property taxes are charged or not.

If it seems that there was an error in the tax authority’s notification regarding the payment amount, then it can be double-checked on the Federal Tax Service website. For a clearer understanding of how tax is calculated, consider an example:

IP Ilkov, owns a warehouse in Moscow, in a building under cadastral number 77:09:0001015:1064. When indicating a real estate property in the form, we will select the type - another building, structure, structure. After this, we will indicate that the property is not included in the list of retail and office real estate.

The calculated cadastral value of the property is 78829968.44 rubles according to Rosreestr. The area of ​​the facility is 2029.6 sq. m. If you own a warehouse in the amount of 1/202 of the total area for more than 12 months, zero tax deduction, no benefits and a tax rate of 2%, the tax amount will be 7805 rubles.

This way you can check any object in the Russian Federation. To find the cadastral number, use a public map, where the address will suffice.

List of objects

At the beginning of the year, the government of each region compiles a list of objects, the tax base for which is determined as their cadastral value. This applies to shopping and administrative centers and other premises used for offices and businesses. This list should be sent to the regional Department of the Federal Tax Service, and also posted on the website of the executive body of the subject itself.

Accordingly, whether or not to pay property tax on a simplified basis depends on its type. If the property of a company or individual entrepreneur on the simplified tax system is not included in the mentioned list, then it is not subject to tax.

For example, in 2021 in Moscow, such a list includes non-residential buildings located on land plots for the placement of retail facilities, catering, consumer services or offices. As well as non-residential buildings or premises in them, which are at least 20% used to accommodate the specified objects (there are additional conditions).

Commercial real estate taxes for organizations and entrepreneurs differ in the calculation procedure, payment deadline and reporting. Therefore, we will consider the features of each of them separately.

Which entrepreneurs are entitled to benefits?

The amount of property tax for individual entrepreneurs depends on the benefits that the owner is entitled to. They are provided to pensioners, disabled people, and summer residents with a plot of land up to a certain size. Each region itself supplements the federal list of beneficiaries, so it can be many times longer. For example, it may include single-parent or large families. But, in general, the state list of categories of citizens who are entitled to benefits for paying real estate taxes looks like this:

If an individual entrepreneur falls under one of the preferential categories, then he can submit documents to the Federal Tax Service if the amount was incorrectly calculated for him.

The basis for recalculating the amount of property tax may be:

• incorrect information about the owner;
• the billed tax amount, which does not take into account benefits.

When an entrepreneur justifies a mistake, the tax inspectorate:

• will reset the amount and penalties that contained the error;
• will generate a new notification and place it in the taxpayer’s personal account.

If the individual entrepreneur does not use the taxpayer’s personal account as an individual, then he will receive a new notification by mail. According to the legislation, the Federal Tax Service can issue an invoice for payment of property tax to individual taxpayers, if for some reason the payer has not been involved in it earlier, within 3 years. In addition, the tax for the same tax period can be recalculated both downward and upward according to the Tax Code of the Russian Federation.

The legislative framework

The Tax Code of the Russian Federation exempts the preferential category of individual entrepreneurs from property tax, which includes disabled people of the first and second groups, disabled people since childhood, Heroes of the USSR and the Russian Federation, WWII veterans, etc. (Article 407).

The main tax law provides clear instructions on the exemption from property tax for individual entrepreneurs using the simplified tax system. This privilege applies to objects used for business purposes and having documentary evidence of the fact of their intended use.

The new federal law on tax collection on the property of businessmen does not apply to this clause. Consequently, property objects used by an entrepreneur in his production are not subject to taxation.

The law allows entrepreneurs to reduce the value of property in order to reduce the tax burden if it is registered to them as ordinary individuals.

When calculating the tax payment, they can subtract the price of the minimum allowable area from the cadastral value of the property:

• private house – 50 sq.m.;
• apartments – 20 sq.m.;
• rooms - 10 sq. m.

Similarly, it is impossible to reduce the value of real estate that is used by a businessman for business purposes.

Federal Law No. 477 secured the right to a zero tax rate for first-time registered businessmen in the first two tax periods. The purpose of such tax holidays was to partially exempt private entrepreneurs from contributions to the state treasury and reduce their tax burden. Several types of taxes, including property tax, fall under the zero rate.

Which individual entrepreneurs are required to pay property tax?

An entrepreneur is required to pay tax if two conditions are met:

1. He is the owner of the property. If the property is used under a lease agreement, the tenant does not have to pay property taxes.
2. The property is located on the territory of the Russian Federation. If the object is located in another country and the individual entrepreneur legally owns it in that state, then he is not obliged to pay tax to the budget of the Russian Federation.

At the same time, an individual entrepreneur pays tax if he works according to OSNO, regardless of the use of property - for personal or business purposes. If the objects are leased, the owner-entrepreneur must also pay tax for them if he works for OSNO, and not the tenant. And even if an entrepreneur gives the property for free use, he will still pay property taxes.

about the author

Klavdiya Treskova - higher education with qualification “Economist”, with specializations “Economics and Management” and “Computer Technologies” at PSU. She worked in a bank in positions from operator to acting. Head of the Department for servicing private and corporate clients. Every year she successfully passed certifications, education and training in banking services. Total work experience in the bank is more than 15 years. [email protected]

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Separate rules for each special mode.

Unified Agricultural Sciences. Individual entrepreneurs who are payers of the unified agricultural tax are exempt from the obligation to pay property tax for individuals (in relation to property used for business activities (in terms of property used in the production of agricultural products, primary and subsequent (industrial) processing and sale of these products, as well as in the provision of services by agricultural producers) (Article 346.1 of the Tax Code of the Russian Federation).

This is important to know: Increasing the UBI to the subsistence level

USNO. The use of the simplified tax system by individual entrepreneurs provides for their exemption from the obligation to pay property tax for individuals (in relation to property used for business activities) (clause 3 of article 346.11 of the Tax Code of the Russian Federation).

UTII. Payment of UTII by individual entrepreneurs provides for their exemption from the obligation to pay property tax for individuals (in relation to property used to carry out business activities subject to a single tax) (Clause 4 of Article 346.26 of the Tax Code of the Russian Federation).

PSNO. The use of PSNO by individual entrepreneurs provides for their exemption from the obligation to pay property tax for individuals (in terms of property used in carrying out types of business activities to which PSNO is applied) (clause 2, clause 10, article 346.43 of the Tax Code of the Russian Federation).

The specified exemption does not apply to the simplified tax system, PSNO and when paying UTII in relation to objects subject to property tax for individuals included in the list determined in accordance with clause 7 of Art. 378.2 of the Tax Code of the Russian Federation, taking into account the features provided for in paragraph. 2 clause 10 art. 378.2).

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Author of the article: Klavdiya Treskova

Consultant, author Popovich Anna

Financial author Olga Pikhotskaya

Expert answers to accountants' questions

Question No. 1 . Where to submit your tax return?

Answer: Property tax must be reported to the Federal Tax Service inspectorate that controls the territory where the property is located. In other words, if an individual entrepreneur is registered with the Federal Tax Service Inspectorate No. 1, and its production premises are located on the territory subordinate to the Federal Tax Service Inspectorate No. 2, it should be reported to the second tax office, and not to the first.

Question number 2 . An entrepreneur purchased a truck for work. Payment was made through IP. Should he pay corporate property tax?

Answer: no, you shouldn't. In this context, an individual entrepreneur is not considered as an organization (based on Article 48 of the Civil Code of the Russian Federation). By the way, there is also no need to pay property tax for individuals, since vehicles are movable property and therefore are not recognized as an object of taxation.

Question number 3 . What kind of real estate do you have to pay tax on?

Answer: with the one that is included in the relevant regional lists. Filing an application to the tax office will not relieve a businessman of this obligation. The tax authorities themselves will calculate the amount of tax and send a payment notice for its payment.

Question number 4 . How to pay tax: the whole amount at once or in parts?

Answer: It depends on what the rules are in your area. If an advance system is in effect, payments are made every quarter. In the 1st–3rd quarter, their amount is taken equal to ¼ of the cadastral value multiplied by the regional rate. The remaining tax amount is paid in the 4th quarter.

Question number 5 . What if the object did not belong to the individual entrepreneur for the whole year?

Answer: payments are calculated in proportion to the number of months of ownership of the property. In this case, the principle applies: if in any month an entrepreneur owned property for more than 15 days, this month is considered full, and he will have to pay tax for it. If the individual entrepreneur owned the property for less than 15 days, the tax for this month is not calculated.

Basis for payment of tax

Until 01/01/2021, the tax on movable property on the balance sheet of the organization since 01/01/2013 was not paid, but the property tax became regional and the Federal Law of November 27, 2017 N 335-FZ amended that movable property is regulated by local law and cannot exceed 1.1%, i.e. benefits may be available for this tax. These benefits can be differentiated by year and by type of activity of organizations. Also, a subject of the Russian Federation can pass laws regarding benefits at any time in 2021 retroactively.

If movable property is obtained as a result of:

• reorganization or liquidation
• transactions with a related party,

then the benefit does not apply

Important! If all of the organization’s property is classified as privileged, then it is necessary to submit a tax return (the 0% benefit does not exempt you from filing reports).

Payers of movable property tax

The main indicator for property on which tax is paid is that it is a fixed asset, that is, the use of:

• for a period exceeding 1 year
• for the purpose of making a profit
• not for sale

The movable property tax is not a new tax, except that it has become regional. This tax is paid by legal entities (including separate divisions with a separate balance sheet) on OSNO. Separate divisions calculate tax according to the laws of the region where they are registered.

Organizations on special regimes (STS and UTII) do not pay this tax.