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By early February, legal entities that are owners of residential property should have submitted a tax declaration to the State Tax Authorities regarding immovable property …
Tax on residential real estate owned by legal entities legal entities
By early February, legal entities that are owners of residential property should have submitted a tax declaration to the State Tax Authorities regarding immovable property other than a land plot. The declaration form was approved by Order No. 1408 dated 25.12.2012 of the Ministry of Finance of Ukraine. But such a Declaration must also be submitted by legal entities in the event that an object subject to property tax arises during the year, or in the event that the enterprise sold an object for which tax is to be charged.
Who submitted and and will submit the tax declaration on immovable property?
According to the Tax Code of Ukraine (subparagraph 265.7.5), filing a declaration is mandatory for legal entities – payers of property tax. As noted in subparagraph 265.1.1 of the Tax Code, this category includes legal entities, including non-residents, who own residential property. So the main thing is to be the owner of residential property, registered in the manner prescribed by law.
Property tax is a local tax. The object of taxation is residential property, and the tax base is the residential area of such residential property. And if for individuals the tax amount is calculated by the tax authorities, legal entities must file a tax declaration. Moreover, while individuals are granted exemptions on payment of this tax depending on the area of housing, there are no such exemptions for legal entities.
Legislative requirements for the tax rate, defined in subparagraph 265.5.1 of the Tax Code, provide a fixed rate of 2.7% of the MZP (minimum wage) in effect at the beginning of the year per 1 square meter only for premises whose area exceeds 240 square meters, as well as residential houses whose (living) area is more than 500 sq. meters. For housing with a smaller area, only a maximum rate is established – 1% of the MZP in effect at the beginning of the year per 1 sq. m..
The question arises: if a legal entity submitted a declaration on property tax, and, for example, on 01.02.2013 one of the residential properties was sold (the owner changed). Is it necessary to submit an amended calculation and how will this affect tax payment?
In answering such a question, it should be noted that the amount of tax calculated and determined by the legal entity in the declaration submitted before February 1 may be variable and may be (and in cases provided for by the Tax Code, must be) adjusted by the taxpayer.
After all, even if the declaration for the year was prepared completely correctly, adjustments may still be made:
- if the legal entity acquires new residential property. In this case, tax begins to be calculated for such new object from the date of acquisition of ownership rights to it (subparagraph 265.7.6 of the Tax Code);
- if the legal entity sells during the year residential property that it owned as of January 1 of the reporting year. In this case, refer to paragraph 265.8 of the Tax Code, which states: the former owner of residential property pays tax from January 1 of the reporting year until the beginning of the month in which the transfer of ownership of such property took place.
In order to adjust their tax obligation, both seller and buyer should submit an amended form of the declaration. Of course, an amended form of the appendix to it “Information on existing residential property objects” is submitted together with the declaration.
However, for the buyer the deadlines for submitting such an amended declaration are set by the Tax Code – in relation to a newly created residential property object, in this case the tax declaration must be submitted within one month from the date of acquisition of ownership of such an object (subparagraph 265.7.5 of the Tax Code), while for the seller such deadlines are not established. In fact, the Tax Code does not stipulate the obligation of the seller of residential property to submit an amended form of the declaration in such a case.
But since the taxpayer – the seller – is interested in reducing the amount of the monetary obligation for property tax that he himself established in the previously submitted declaration, he should submit such a declaration in amended form before the due date for payment of the next advance installment of the annual tax amount.
Tax payment deadlines
Payment of property tax must be made quarterly by the 30th day of the month following the reporting quarter (subpara “b” of para. 265.10.1 of the Tax Code). Thus, in 2013 legal entities subject to this tax must make payments by April 29 (inclusive) for the 1st quarter, by July 29 (inclusive) for the second, October 29 (inclusive) for the third, and by January 29, 2014.
Liability for violation
Late submission or failure to submit it will entail a fine in the amount of 170 in accordance with paragraph 120.1 of the Tax Code. For repeat violations the amount will increase to 1020 .
In addition, in accordance with paragraph 126.1 of the Tax Code the taxpayer bears responsibility for the amount of tax payment. Thus, in case of non-payment of the agreed tax amount within the terms defined by the Tax Code within 30 calendar days, the penalty will be 10% of the repaid amount of the debt. If the period exceeds 30 calendar days, the rate increases to 20%.
According to paragraph 54.1 of the Tax Code, the agreed amount of the tax obligation, in particular, is the amount of the tax and/or monetary obligation and/or penalties that the taxpayer independently calculates and indicates in the tax declaration or amended calculation submitted to the tax authority within the deadlines established by the Tax Code of Ukraine.
Therefore, the amounts of tax indicated in the declaration are the agreed amount of the tax obligation. And for late payment of the amounts of property tax that the taxpayer independently determined and stated in the submitted declaration, he will be liable under paragraph 126.1 of the Tax Code.