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The rights of foreign nationals (Russia)

Question

Ms Duvall,

We have a legal issue we would like your advice on (we're not planning a divorce - but you have useful info on your web site about our question and would seem to know more than most, including lawyers and notaries in Moscow) -

What is the best ownership of Moscow property for tax and survivorship purposes for a couple with one Russian citizen (wife - who is a dual Russian / US citizen).

We have an apartment in Moscow bought originally under under the husband's name (US citizen) via a mortgage. It is currently listed under the husband and wife's name. We would like to minimize potential taxes if we decide to sell (which would probably mean putting it solely in the wife's name (she is also still registered as a Moscow resident - and did recently complete the registration of the fact that she has also a foreign passport), but also make any survivorship issue as uncomplicated as possible. Our assumption is that there is no straightforward Russian equivalent to Joint Tenant with Right of Survivorship ownership mechanism.

What would be your estimate for basic review and advice of our issue.

Answer

You have to pay taxes only in the case of the sale of this apartment. As long as you do not plan to sell the apartment, you do not need to pay any taxes.

You have several options to avoid paying extra taxes on the sale:

1. You do not have to pay extra taxes, if you live permanently in Russia for 183 days in a calendar year. In this case, you have to pay taxes based on the rate provided for tax residents of the Russian Federation.

2. You do not have to pay taxes if you sell the apartment for the same price for which you purchased it.

3. You do not have to pay taxes if you sell the apartment for less than it was bought.

For my professional opinion, this is not good idea to transfer ownership to your wife’s name, because you have high risk to lose 100% of your property.
Thus, making the transaction in favor of the wife, you have to solely rely on her honesty and integrity. According my experience, you don’t have to trust your wife for 100%.

Your marriage certificate is necessary if you need to confirm that you married (for divorce issue, etc). But you can receive marriage certificate with apostille and make Russian translation for just in case.

If you decided to sell apartment, you have to leave Power of Attorney. You can do this in in Russian Federation (any notary public), or in the United States (Russian Consulate or any notary public plus apostille).

I will be glad to prepare for you a power of attorney, as well as provide to you any other assistance in resolving this issue.
Karina Duvall
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