According to p.3 art.62 of The Constitution of the Russian Federation, foreign nationals and stateless persons shall enjoy in the Russian Federation the rights and bear the obligations of citizens of the Russian Federation, except for cases envisaged by the federal law or the international agreement of the Russian Federation. Art. 2 of The Civil Code of Russian Federation specify that the same rule is applicable for legal entities.
So, the procedure for real estate acquisition does not differ a lot for different market participants. But some details exist as well.
DOCUMENT REQUIREMENTS
In relation to legal entities “Guidelines on the procedure of state registration of rights to real estate property and transactions with it”, approved by The Order of the Ministry of Justice (01.07.2002, № 184) are applicable.
According to the Order, foreign documents need to be legalized unless otherwise provided by Russian legislation or international agreements.
States which are parties to The Hague Convention from the 5th of October, 1961 “Abolishing the Requirement of Legalization for Foreign Public Documents” agreed toabolish the requirement of diplomatic or consular legalization for foreign public documents in their territories. Bilateral international agreements with other countries may also abolish the legalization procedure.
Foreign document that is to be filed to the territorial bodies of the Federal Registration Service needs notarized translation.
APPLICABLE LAW
In case the object of the transaction is real estate listed in The Russian State register, such transaction shall be carried out under Russian law, without regard at any other agreements reached by the parties. All agreements to contrary shall be void. Therefore, Russian arbitral court at the place of real estate location will have exclusive jurisdiction if dispute between parties arises.
PERSONAL LAW
Personal law of the state where the legal entity was incorporated is applicable for determination of some positions. They include: the status of an organization as a legal entity; its form of incorporation; requirements applicable to the company’s name; the issues of incorporation, reorganization and liquidation of the legal entity and some others, prescribed in art. 1202 of The Civil Code.
LAND REGULATIONS
According to art.15 of The Land Code, foreign legal entities cannot become owners of land plots in border areas and some other special territories, set forth by legislation. The land plots which are in federal or municipal property may only be sold for the price, prescribed by legislation. Also foreign legal entities may only lease agricultural land, if their share capital is held by foreign shareholders in the amount of more than 50%.
TAXATION
In case of real estate purchase, foreign company is to pay property tax. Here the situation may be different for legal entities operating in Russia through permanent representations and the ones not having permanent representations. In the first case the purchased real estate property is to be mentioned in financial statement documents as “plant and equipment” for the purposes of taxation. For the company that has no permanent representation, the mere fact of ownership ove real estate property will be an object of taxation.
CURRENCY CONTROL
Non-resident is to pay:
– State duty, which is to be paid in rubles. For this purpose it will be necessary either to open ruble account in a foreign bank or to open an account in a Russian bank.
– Payments provided by agreement. Nowadays currency operations in relation to non-residents are not limited. However, it should be borne in mind that currency operations are subject to supervision of competent state bodies.
To conclude, real estate purchase itself includes various procedures, either for Russian or foreign market participants. This research was aimed at listing the most important aspects. Hope, it will be helpful in taking decision about real estate purchase in Russia.
Article by Ms. Arina Makarova.