Translated material
How to divide a million
The Constitutional Court will deal with tax deductions
Some provisions of tax legislation , designed in theory to make the life and financial situation of Russians faced with the sale or purchase of housing, became the subject of consideration by the Constitutional Court. Judges will have to decide how consistent the country's Basic Law is with the current procedure for providing a so-called tax deduction - a refund of personal income tax (NDFL) - for transactions with property that is in shared ownership.The imperfection of that part of the Tax Code, which mentions the possibility of citizens who have purchased real estate to return part of the taxes or avoid their additional assessment, has already given rise to legal proceedings. And the Constitutional Court was not the first highest court to which dissatisfied Russians reached. Last November, a similar case concerning tax deductions was considered by the Supreme Arbitration Court .
The reason for the proceedings in both courts was Article 220 of the Tax Code, which allows the buyer or seller to reduce their taxable income. It is believed that when selling real estate, citizens receive additional income, from which they must pay the usual personal income tax to the treasury - 13% of the transaction amount. However, subparagraph 1 of paragraph 1 of Article 220 of the Tax Code establishes that the taxpayer has the right to deductions when selling residential houses, apartments, dachas, garden houses or land plots (as well as shares in this property). Subparagraph 2 gives the right to tax deductions from the amount spent by the taxpayer on new construction or on the purchase of housing (house, apartment or share in them). As real estate lawyer Alexey Shevchenko explained to Vremya Novostei, according to the Tax Code, the maximum amount of deduction that a taxpayer can claim upon sale should not exceed 1 million rubles. “More precisely, if the price of housing is over 1 million and the apartment has been owned for less than three years, then the tax deduction is 1 million,” the lawyer added.
At first glance, this provision of the law should make life easier, in particular, for participants in housing transactions. But the situation becomes more complicated when citizens who own housing in shared ownership apply for the benefits due to them. Then the refunded amount is divided by the number of participants in the transaction, which naturally causes their dissatisfaction. Taxpayers also do not like another option - when property is acquired in the name of one of the legal spouses, and the other is denied the right to deduction. It was the second case that was considered in November 2007 by the Supreme Arbitration Court. Then the Supreme Court confirmed the right of both spouses to a deduction when purchasing an apartment, since property acquired during marriage is considered joint property, no matter who it is registered in the name of. The Constitutional Court is considering the first case concerning shared ownership.
The complainants argue that the Tax Code norms requiring the division of deductions violate the right of citizens to housing, guaranteed by the Constitution of the Russian Federation. “The legal uncertainty of the contested norm allows for its arbitrary application” by tax authorities, the appeal to the Constitutional Court states. Apparently, the plaintiffs consider “the distribution of tax deductions between taxpayer-owners without taking into account their actual income or expenses” to be arbitrary.
In particular, the Kozlov family from Omsk, who applied to the Constitutional Court, sold housing that belonged to the three of them in equal shares - a third of the apartment to each. After which all family members purchased their own separate housing. In this case, tax officials said that everyone could be given one single tax deduction - in the amount of 1 million rubles, so that each family member could reduce the income received from the sale of an apartment by 333.3 thousand rubles. However, according to Messrs. Kozlovs, a tax deduction should be provided to each of them, based on the value of their shares, and not the entire apartment.
“This is a violation of the principle of equality,” said Mikhail Krotov, the presidential plenipotentiary representative to the Constitutional Court, after studying the complaint. It is noteworthy that, contrary to custom, the presidential plenipotentiary yesterday easily agreed with the arguments of the complainants, as did government representative Mikhail Barshchevsky and Alexander Kalugin, representing the Prosecutor General's Office in the Constitutional Court.
A resident of the Karelian city of Segezha, Natalya Ivanova, sold her apartment and purchased another one with a larger area. Local guardianship and trusteeship authorities considered that this transaction affected the legitimate interests of six-year-old Gleb, Natalya’s son, and therefore set a condition: the purchased housing must be registered as shared ownership with the child. “Since my son is my dependent, I covered the cost of purchasing housing in full,” Ms. Ivanova writes in her statement. However, when she decided to exercise her right to the benefit, the local tax office refused to provide a deduction for the entire amount spent on the purchase of the apartment, since it was “distributed among the co-owners in accordance with their shares.” According to the law, a six-year-old child is also a co-owner.
The Presidential Envoy to the Constitutional Court also agreed with the injustice against Ms. Ivanova. “The requirement to register housing as shared ownership goes beyond the powers of the guardianship authorities,” noted Mr. Krotov. “The law instructs these bodies to control only transactions for the sale of property, but not to set conditions - this is the prerogative of the legal representatives of the minor, in this case his mother.” In addition, he noted that tax legislation is a very specific area, since “it does not take into account the state of a person’s legal capacity and capacity.” On the one hand, it is understood that the legal representative, that is, the mother, must pay for a child who, by definition, has no income of his own. But, on the other hand, legal representatives do not have the right to tax deductions. According to the presidential envoy to the Constitutional Court, this is illogical.
This incident, according to Mikhail Krotov, raises the question of how minors, minors and incompetent persons should exercise their rights in the field of taxation. Of course, you can completely exempt minors from tax obligations. But then the owners will begin to transfer apartments to children in order to evade taxes. To clarify the situation, Mr. Krotov believes, the legislator should clarify the provisions of the law: if the share is a minor family member, then the right to the entire tax deduction should belong to the parents.
Considering the unanimous support that the representatives of the respondent party provided to the complainants, it can be expected that the Constitutional Court will oblige the legislator to specify the rules of the “article on deductions” in the part that concerns shared ownership. Perhaps then Russians will more often turn to tax authorities for benefits due under the law and to lawyers with a request to protect their legal rights. In the meantime, as lawyer Alexey Shevchenko testifies, cases related to tax deductions remain rare.