Property tax for micro, small and medium enterprises

28/10/2018

Ministry of Finance issued Opinions No. 430-00-00835/2017-04 and No. 430-00-00073/2018-04, both dated on 13 August 2018, stating that legal entities applying International Financial Reporting Standards for Small and Medium-Sized Entities (IFRS for SMEs) and Rulebook on the Manner of Recognition, Measurement, Presentation and Disclosure of Items in the Individual Financial Statements of Micro and Other Legal Entities (Rulebook), are not allowed to use fair value of property as a property tax base.

Issued opinions state that Article 7, Paragraph 1 of the Property Tax Law stipulates that legal entities that disclose property in their books based at fair value in accordance with International Accounting Standards (IAS) or International Financial Reporting Standards (IFRS) and adopted accounting policies, determine the property tax base as the fair value of these properties on the last day of the business year preceding the year for which property tax is determined. As this provision refers only to IFRS and IAS and not to IFRS for SMEs or the Rulebook, taxpayers who apply fair value method in accordance with these accounting frameworks are not allowed to determine the property tax base in the amount of fair value of property.

These opinions are contrary to the practice of many taxpayers who apply IFRS for SMEs or Rulebook and determine property tax base in the amount of fair value of property, as well as practice of some Public Revenue Offices which so far have been accepting tax returns of these taxpayers in which the tax base was declared at fair value of property.

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