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boron
24-02-2013, 22:52
I have inherited an appartment in Russia, Moscow which is worth roughly 250k dollars. I have just completed all the post-death paperwork (takes about 6 months mainly to verify that there is no other heirs). I would like to sell it. I understand that there is a 30% tax for non-citizens of Russia. Does this tax applies to the whole sales price or only to the capital gain (the difference between how much I am selling for and the appartment worth at the time of the death)? If it is a capital gain -- do I have to proof how much the capital gain is? -- and if yes how?

The "notarius" papers that make me an official heir sate that the appartment worth is much less than it is expected selling price. Can this create a problem in terms of paying a tax on the capital gain? Also in addition to real estate fees, what are the other fees involved in selling the appartment.

thanks in advance for your help.

sharanam
01-03-2013, 08:11
Capital gain is paid on the difference between the inherited MARKET VALUE and the sell price. It is advantageous, if you can do it, to spend 183 days in Russia prior to selling, as this will make you a Russian tax resident, allowing for a lower 13% capital gains tax rate and thereby saving you over 40K in taxes.

celia
01-03-2013, 08:31
Boron, married or single? :D

MashaSashina
01-03-2013, 10:55
I'm sorry, but your income is the whole sales price. Come to live here for 6 months and you will save about 40K. ))) or come here after 3 years of ownership, live 6 months and you will pay nothing.
I'm not a tax specialist, but what I understood from our tax code:
1. Selling price is the income and we pay taxes on it;
2. Non-residents pay 30% of income received;
3. As your tax rate is different from 13% you can't apply tax allowances;
4. If you can use allowance on actual expenses you made to receive this income or not is a arguable point, but I doubt you can have any allowances at all, but I'm pretty sure that inheritance is not your expense.

boron
05-03-2013, 08:11
I'm sorry, but your income is the whole sales price. Come to live here for 6 months and you will save about 40K. ))) or come here after 3 years of ownership, live 6 months and you will pay nothing.
I'm not a tax specialist, but what I understood from our tax code:
1. Selling price is the income and we pay taxes on it;
2. Non-residents pay 30% of income received;
3. As your tax rate is different from 13% you can't apply tax allowances;
4. If you can use allowance on actual expenses you made to receive this income or not is a arguable point, but I doubt you can have any allowances at all, but I'm pretty sure that inheritance is not your expense.
thank you for your answer -- but it contradicts sharanam answer above. Also according to your answer it appears that I have yo pay inheritance tax of 30% - -I thought there is no inheritance tax in Russia.

boron
05-03-2013, 08:16
Capital gain is paid on the difference between the inherited MARKET VALUE and the sell price. It is advantageous, if you can do it, to spend 183 days in Russia prior to selling, as this will make you a Russian tax resident, allowing for a lower 13% capital gains tax rate and thereby saving you over 40K in taxes.
Thank you for your answer. Who decides/establishes what the MARKET PRICE is at the time the property is inherited?
After I sell the real estate - -do I have to proof to authorities what the MARKET PRICE was -- before I can transfer the money from the sale abroad?
So whatever the price of the apartment is according to the "notarius" papers is immaterial for the tax calculation purposes on the capital gain?

MashaSashina
05-03-2013, 09:36
thank you for your answer -- but it contradicts sharanam answer above. Also according to your answer it appears that I have yo pay inheritance tax of 30% - -I thought there is no inheritance tax in Russia.
Welcome. My reply was about income tax though, only for the case you sell your property.

kanga
05-03-2013, 09:37
30 percent is what you would pay in tax when you sell it not when you inherit it.

Lost in moscow
05-03-2013, 10:34
Why sell it? I find that to be a poor move. Owning property in Moscow is like owning a goose that lays gold eggs. Yea so the lump sum is a decent number, but money gets spent and one day that sum will be no more. but the property will still be there. (unless condemned) but then you are given a replacement apartment so the lose on your side would be minimum and if your smart about it can actually be a gain.

Renovate the place, rent it out. Plus, who knows what will happen in the next 40-60 years that you have left on this planet, having a second place in a different country is a great safety line. Plus the property tax (if you can even call it that) is minimum.

Moscow will improve, Quality of life in Russia overall will be improving over the next 6 years for sure. I wouldn't recommend selling.

boron
11-03-2013, 05:46
I am getting confused as one person who replies says it is only capital gain I am taxed on (difference between the sale price and the price at the time I am inherited the property). Also not clear -- if I would have inherited cash say 250k -- then there is no tax. however if I inherited apartment that is worth 250k and then sold it for 250k - -then there is a tax on the whole 250k amount. Can you please elaborate?

frankjohn2
11-03-2013, 07:38
I am getting confused as one person who replies says it is only capital gain I am taxed on (difference between the sale price and the price at the time I am inherited the property). Also not clear -- if I would have inherited cash say 250k -- then there is no tax. however if I inherited apartment that is worth 250k and then sold it for 250k - -then there is a tax on the whole 250k amount. Can you please elaborate?

You are getting answers based on BOTH the tax treatment in the US and Russia intermingled.... you are American, right?

I am NOT an expert on Russian tax laws. What I am writing is based on my online research that I have done of the Russian tax laws.

You will pay capital gains to the Russian government on the selling price at 30% unless you are a 'resident'. To be a resident, you must be present in Russia for over 183 days in the year. Residents pay tax at 13%.

However, the good news is that there is NO CAPITAL GAIN tax on the sale of real estate that has been held for over 3 years.

I did see a reference in only one source to a small deduction from the selling price but cannot confirm it so am ignoring it.

In addition, you will pay capital gains to the IRS on the gain realized on the sale from the fair market value and the time of death. Of course, you also receive a deduction for foreign taxes paid, so this should not add to your total tax bill if you sell now, unless you are in the top tax brackets in the US.

If you wait the 3 years to sell and avoid the Russian capital gains tax, you will pay capital gains in the US and not have a deduction for foreign taxes. So you will end up paying Long Term capital gains on the increase in value from the date of death.

So to recap -

--Russia tax of 30% on selling price unless you wait 3 years before you sell.
-- US Cap Gains tax on the realized gain from fair market value at date of death, less a deduction for Russian taxes paid (if any).

And yes, if you had inherited cash there would be no tax.

You were related to the decedent, I hope ...

boron
21-03-2013, 07:50
yes, I understand about US law. My questions was strictly about the Russian taxation. Is there a website you can refer me to which states that if I (the heir) sell INHERITED property for 250k (with no capital gain) -- then I, as a heir, have to pay 30% tax. On the surface it does not make much sense -- as I am just converting the inherited property into cash -- thus why I would pay the tax. As for example, when I inherit cash I do not have to pay no tax at all. Yes, I am US citizen and not Russian citizen. And yes this was my parent whom I inherited the property from. Would the situation be any different if the property was transferred to the estate at the time of death, wher I could have been named an executor of the estate -- and then by selling the property I would have distrubuted the proceeds to the heirs (myself in this case).

Thank you very much for your thorough answer.

frankjohn2
21-03-2013, 08:47
The sale of real estate in Russia, from the research I have done online ... please feel free to use Google yourself, is taxable. There is no concept of "capital gain" as we know it in the US. The selling price is the taxable amount. The selling price is exempt from tax if you hold the real estate for 3 years.

The tax rate for residents is 13% and for foreigners is 30%.

I agree that on the surface it does not make much sense ... that is because we are familiar with how things are done in the west. This is Russia and this is how they do it.

So to recap -

--Russia tax of 30% on selling price unless you wait 3 years before you sell.

In no particular order:


http://www.worldwide-tax.com/russia/russia_tax.asp

http://www.acg.ru/english/declaring_personal_income_tax_in_the_russian_federation

http://www.cfe-eutax.org/taxation/personal-income-tax/russia

The last link spells it out the clearest:

Capital gains for individuals
The standard tax rate in Russia is 13 % for a resident and 30 % for a foreign resident. Taxable gains are the gross proceeds or selling price, without deductions for acquisition costs or other expenses. The profit on the sale of real estate or other asset that has been held for 3 years is exempt from tax. Maximum deduction is 1 million rubles.

boron
23-03-2013, 08:25
Can I complete a transaction of selling my real estate in Russia while I am abroad. In other words if I live in the US can I sell my real estate in Russia to someone in the US (while I am in the US as well) without going to Russia. If not in the US, can I complete this transaction in any other country (and being paid there for the real estate) without going to Russia.

thank you

boron
23-03-2013, 08:29
How would I go in transfering inherited money (15k) from the bank account in Russia to US. I have completed all the paperwork as being an official heir to that bank account. What paerwork to I need to show to the bank personnel in Russia to complete the wire transfer?

Nobbynumbnuts
23-03-2013, 09:16
Can I complete a transaction of selling my real estate in Russia while I am abroad. In other words if I live in the US can I sell my real estate in Russia to someone in the US (while I am in the US as well) without going to Russia. If not in the US, can I complete this transaction in any other country (and being paid there for the real estate) without going to Russia.

thank you

I'm in the process of selling real estate in Russia right now and while i think it might be possible, i don't think it's advisable.
You would need to sign power of attorney to a friend, family member or the selling agent to action the sale. You would need to have a notarized copy of your passport made to get that done.
How would you deal with receiving payment and transfer of the funds out of Russia? I think you would need to be there to do this.

I have given power of attorney to the selling agent to proceed with the sale up to the signing of contracts. He can except the deposit on my behalf. At this point the buyer is obviously serious so i will then go to Russia to finalize the sale and transfer the funds. Should take about a week, i believe.
Be careful.

frankjohn2
23-03-2013, 10:18
Can I complete a transaction of selling my real estate in Russia while I am abroad. In other words if I live in the US can I sell my real estate in Russia to someone in the US (while I am in the US as well) without going to Russia. If not in the US, can I complete this transaction in any other country (and being paid there for the real estate) without going to Russia.

thank you

I would say, as the previous poster indicated, that it would really NOT be in your best interest to do so. You are most likely going to have to go to Russia at some point.

I really do not see how you would accomplish the power of attorney form without going to Russia to get it done. You will have to have a notarized translation of your passport I am sure and to get that done in the US will be difficult. I do not know how you would go about getting a power of attorney drawn up without the assistance of a Russian notary.

Then there is the whole issue of receiving the payment for the sale, and repatriating the funds. Do you even know how real estate closings are handled in Russia as far as the actual payment? I suspect that you do not, and if you leave it to someone else, you will likely get ripped off.

No, you really MUST go to Russia when it comes time to close the deal ... really.

So get your passport out and apply for a Russian visa - if you are American the good news is that the visa's now are 3 year multi entry, so you will only need to worry about the visa hassle once - which is a good thing.

frankjohn2
23-03-2013, 10:46
How would I go in transfering inherited money (15k) from the bank account in Russia to US. I have completed all the paperwork as being an official heir to that bank account. What paerwork to I need to show to the bank personnel in Russia to complete the wire transfer?

Simply initiate the wire transfer through your Russian bank's online banking ...

Oh wait, you probably do not have the funds in YOUR bank account in Russia yet. How exactly are the funds being transferred to you? I will not claim to have any knowledge of how the 'probate' process works in Russia, so I can only help from the point of the funds being in your control. However getting to that point is very likely to result in a trip to Russia to accomplish.

boron
09-04-2013, 09:14
thank you very much for thorough answer. If you could share your experience later would be great.

I have all doverenosts established on my prior trip to russia. What I meant about not going to Russia though is to be paid for my Moscow apartment here in the US by a person who has permanent resident status in US but lives in Russia. In this case I do not have to transfer money across the border. Or I cannot do this because there are some some documents that I need to complete and be present in Russia in order to complete the deal?

boron
09-04-2013, 09:17
Simply initiate the wire transfer through your Russian bank's online banking ...

Oh wait, you probably do not have the funds in YOUR bank account in Russia yet. How exactly are the funds being transferred to you? I will not claim to have any knowledge of how the 'probate' process works in Russia, so I can only help from the point of the funds being in your control. However getting to that point is very likely to result in a trip to Russia to accomplish.
thank you. Would I have any issues in transferring more than 3000 dollars out of the a ussian account. Would they require any proof where the money come from etc.?

thanks

frankjohn2
09-04-2013, 11:45
thank you. Would I have any issues in transferring more than 3000 dollars out of the a ussian account. Would they require any proof where the money come from etc.?

thanks

Having never transferred that amount of money OUT of Russia, I cannot say for sure ... but I suspect that there would be no problem as currency controls for non-resident bank accounts seemingly have been eliminated since last year. The bank would be the likely one to ask you, and they should have all the proof from what you have stated in your previous posts.

The $3k/$10k limits have to do with the transportation of physical cash.

Arthuro
21-04-2013, 03:45
1) Regarding tax:

if you are a Russian tax resident (sure with TRP, but I think could be simply 183 days on a visa - better to double-check this) and you own it 3 yrs, the tax is zero
if you are a Russian resident and own less than 3 years, the tax is 13% for the sum above 1 mln 13%*(250k$ - 1mln roub)

if you are not a resident, the tax is 30% from the whole amount.

I have no idea about US taxation about this, but if you don't transfer money to the US, I suppose noone there will know about that..
I don't understand this system and simply don't understand for what reason US citizens pay anything from worldwide income when its easy to evade it
but its not me to judge

2) Regarding my advice. A fresh inheritance is not welcomed by the market, plus you're a foreigner - that is a drawback in this case.
you'll have to discount at least 20-25% or more from the market price.
After several yrs this dicount will be less (will be anyway but considerably less).
Plus you lose on tax much. So you could lose almost a double of the whole sum.
So if you're not short in money, it's better to wait at least 3 yrs and to come here for 6 months.
120k is quite a money for doing that I would say.
But anyway it's up to you to decide.

3) Regarding the attorney, yes your representative formally can sell the flat (you'll need to sign a paper at the Russian consulate).
BUT - fresh inheritance + attorney + foreigner - it will be hard to sell even for 50% of market price. An plus 30% taxes. So what you will have in the end =)

boron
22-04-2013, 04:36
thank you. You mentioned that fresh inheritance may reduce the selling price. Is it because the buyer may think that there are mightbe some liens on the appartment. Please note that it was over 8 months since the person has died -- so aall the paperwork passed the "6 months bar". Do you know when and how I would need to pay 30% tax on the transaction? is it done at the time I complete the paperwork or is it done the same way as it is done in US -- nest year when one prepares taxes?

thanks

again

Arthuro
22-04-2013, 18:00
thank you. You mentioned that fresh inheritance may reduce the selling price. Is it because the buyer may think that there are mightbe some liens on the appartment. Please note that it was over 8 months since the person has died -- so aall the paperwork passed the "6 months bar". Do you know when and how I would need to pay 30% tax on the transaction? is it done at the time I complete the paperwork or is it done the same way as it is done in US -- nest year when one prepares taxes?

thanks

again

Yes, it is because the buyer may think...
8 months is very fresh

the same way - the next year.

Nobbynumbnuts
22-04-2013, 23:22
Once you have completed the sale and the money is in your account in Russia, simply transfer it out of the country. The bank will not ask for proof any tax has been paid.

boron
23-04-2013, 03:53
Yes, it is because the buyer may think...
8 months is very fresh

the same way - the next year.
thank you very much. So nobody asks you to pay the tax when you complete the sales of the aprtment - right? Does it apply to foreign nationals? From what I have heard that your real estate sales transaction is immediatly known to the Russian authorities and you have to pay this tax by filing the paperwork one month before your departure - so these money would be released for transfer out of the country. Is it just an urban legend?
I just wonder how many foreigners who do not plan to reside in Russia would be dilligent in paying the tax after they left the country. It is just starnge that there is no mechanism for the Russian authorities to enforce immediate tax paying for foregners who can leave Russia.

Arthuro
23-04-2013, 11:05
thank you very much. So nobody asks you to pay the tax when you complete the sales of the aprtment - right? Does it apply to foreign nationals? From what I have heard that your real estate sales transaction is immediatly known to the Russian authorities and you have to pay this tax by filing the paperwork one month before your departure - so these money would be released for transfer out of the country. Is it just an urban legend?
I just wonder how many foreigners who do not plan to reside in Russia would be dilligent in paying the tax after they left the country. It is just starnge that there is no mechanism for the Russian authorities to enforce immediate tax paying for foregners who can leave Russia.

Yes, nobody ask at the time you complete.. The transaction will be known to the authorities for sure after it is made. I have no idea what will happen next..
May be you could get away with it but due to your amount this is a criminal case (not just fines) and I am very unsure that the US officials will find this "politically engaged because of bloody Putin regime" even if you never visit Russia in your life =)

Nobbynumbnuts
23-04-2013, 12:23
How does anyone know you are leaving. People sell apartments all the time. Just transfer the money outside Russia immediately after the sale then leave.
This means you won't be able to return as there will be an outstanding tax bill to pay.

penka
23-04-2013, 12:27
To my knowledge, there is no inheritance tax in RF.
Nonresidents pay flat rate of 30% income tax.

penka
23-04-2013, 12:29
How does anyone know you are leaving. People sell apartments all the time. Just transfer the money outside Russia immediately after the sale then leave.
This means you won't be able to return as there will be an outstanding tax bill to pay.

That's illegal.

The bank will surely ask about the source of money and will see, the taxes are payed before any transfers are executed.

Nobbynumbnuts
23-04-2013, 17:42
That's illegal.

The bank will surely ask about the source of money and will see, the taxes are payed before any transfers are executed.

No, the bank will ask a generic question on the transfer form. 'State source of funds' Write 'sale of apartment' or anything you like. The bank will not check taxes have been paid and has no obligation to do so. They are obliged to collect taxes for the government.
How is it illegal? You have until the end of the tax year to pay your taxes.

Your bank might ask you to prove the source of funds when you transfer the money to your account outside Russia. Again, they are not interested if you have paid taxes in Russia, just that your not involved in money laundering.

Arthuro
23-04-2013, 19:33
To my knowledge, there is no inheritance tax in RF.


For close relatives only.

boron
01-05-2013, 00:19
For close relatives only.
This is true -- there is no inheretance tax in Russia for close relatives, including foregners. So if I inherited money hidden in the mattress -- this would be Ok as there is no tax to pay. Same would apply to an appartment -- there is no tax to pay. However, if I decide to SELL the appartment shortly after I have inherited -- then the foreigners need to pay 30% (RF residents pay 13%) of the sale price of the appartment. I think this is how I understand the situation and it appears how most of the other people on this site interpret the Russian law. I hope I am not correct on that - as it does not make sense

frankjohn2
02-05-2013, 08:53
This is true -- there is no inheretance tax in Russia for close relatives, including foregners. So if I inherited money hidden in the mattress -- this would be Ok as there is no tax to pay. Same would apply to an appartment -- there is no tax to pay. However, if I decide to SELL the appartment shortly after I have inherited -- then the foreigners need to pay 30% (RF residents pay 13%) of the sale price of the appartment. I think this is how I understand the situation and it appears how most of the other people on this site interpret the Russian law. I hope I am not correct on that - as it does not make sense


Why not? It makes perfect sense. Perhaps because it is not the "American Way" it doesn't make sense to you ... but this is Russia and things are done the Russian Way. If you don't want to pay the tax, hold the apartment for the 3 years that is required to avoid the tax.

MashaSashina
03-05-2013, 02:17
This is true -- there is no inheretance tax in Russia for close relatives, including foregners. So if I inherited money hidden in the mattress -- this would be Ok as there is no tax to pay. Same would apply to an appartment -- there is no tax to pay. However, if I decide to SELL the appartment shortly after I have inherited -- then the foreigners need to pay 30% (RF residents pay 13%) of the sale price of the appartment. I think this is how I understand the situation and it appears how most of the other people on this site interpret the Russian law. I hope I am not correct on that - as it does not make sense
You really don't see the difference between transferring something between family members and selling it in a market, do you?