Inheritance tax and inheritance law in Russia
Taxation Researcher | December 12, 2020
The Global Property Guide looks at inheritance from two angles: taxation, and what inheritance laws apply to foreigners leaving property in Russia: what restrictions there are and whether making a will is advisable.
How high are inheritance taxes in Russia?
From 01 January 2006, inheritance tax was abolished in Russia.
However, gifts of real estate properties from individuals other than close relatives are taxed at the standard income tax rate of 13%.
Thanks to Vasiliy Torkanovskiy & Khristofor Ivanyan of Ivanyan & Partners
What inheritance laws apply in Russia?
Russian inheritance laws affect everyone who owns property in the Russian Federation.
The main laws connected with inheritance are: the Civil Code of the Russian Federation, the Civil Procedure Code of the Russian Federation, and the Fundamental Legislation of the Russian Federation on Notarial System. The Russian Federation is a participant to some international treaties concerning international legal assistance, inter alia: Convention on the service abroad of the judicial and extrajudicial documents in civil or commercial matters (Hague, 15.XI.1965); Convention on the legal assistance and legal relations in civil, family and criminal matters (Kishinev, 07.X.2002); Convention on the legal assistance and legal relations in civil, family and criminal matters (Minsk, 22.I.1993).
Russian inheritance laws affect everyone who is domiciled (i.e. has his/her usual place of living, but not necessarily his/her nationality) in the Russian Federation, and also affect everyone, including foreigners, who own property in the Russian Federation. The general principles concerning jurisdiction over property are:
- The principle of lex rei sitae. Rights to moveable and immovable property accrue and terminate according to the laws of the country where the property is situated.
- Property rights to movables in transit are regulated by the laws of country of departure.
Russian laws (lex rei sitae) govern the inheritance of any property situated or registered in the Russian Federation, including property owned by foreigners who are not domiciled in the Russian Federation. No distinction is made between foreigners with different religions or nationalities in respect of their rights and obligations connected with property and inheritance.
Renvoi (the referal of legal issues back to Russian courts from a foreign jurisdiction) is taken into consideration with regard to the legal status of all foreigners including those with rights to property in the Russian Federation. In other cases, if a foreigner´s national inheritance law becomes applicable, then the Russian courts will apply the foreigner´s law, notwithstanding any foreign conflict of law rules.
If Russian nationals own immovable property abroad, then as a general rule the Russian authorities apply the foreign inheritance law, following the principle of lex rei sitae. If a Russian national owns movables abroad, then Russian authorities apply the inheritance law of his/her last place of living.
Russian courts of general jurisdiction are competent to resolve inheritance cases.
Proceedings must be opened in the last place of residence of the deceased, except for cases where it is unknown, or is situated outside the Russian Federation. In such cases the succession must be opened in the place where the immovable property (or its most valuable part) is situated, but if there is no immovable property, in the place where the most valuable movables are situated.
Russian courts are competent to resolve disputes regarding foreigners´ property rights. A deceased person´s creditors, who file their claims before the acceptance of inheritance by the heirs, must file them with the court located in the place of opening of the succession. Claims against foreigners can only be resolved by the Russian courts if the deceased had his/her place of living in the Russian Federation and/or if the property in question is situated in the Russian Federation.
Russian courts do not necessarily hear the succession proceedings. If there is no dispute, then the local notary public can sanction the acceptance of an inheritance, and can issue certificates for the right of inheritance. Russian notaries public apply Russian law to all activities connected with the protection of the inheritance and with the issuance of the inheritance certificates, even if some of the heirs and/or the deceased are foreigners.
An inheritance must be accepted within a period of six months from the moment of opening of succession. It is convenient that the acceptance of an inheritance can be effected in the name of a foreign heir by his/her representative in the Russian Federation. The certificate for the right of inheritance is usually issued by the notary public after the expiration of six-months. If there is a just cause, this period may be restored after its expiration by a competent court, or by agreement of the heirs.
If foreign elements (e.g., immovable property situated abroad, or foreign heirs) are involved in inheritance proceedings, then the international legal assistance procedure (e.g., rogatory letters, service abroad of judicial and extrajudicial documents, provision of information on foreign law) may be applied. This legal procedure can take from 1 to 10 months or more, in addition to the time for notarial or court proceedings.
There is a statutory order of heirs for intestate succession.
If no provisions are made in prospect of death, i.e. the deceased does not leave a will or a "testamentary disposal" (see below), a complex statutory order of intestate succession is applied to all persons who are subject to Russian inheritance law. The heirs in law (physical persons only) including the children of the deceased, his/her spouse and parents, and disabled dependants of the deceased) are divided into eight priorities. The heirs in the higher priorities inherit statutory intestate shares preferentially to the heirs in the lower priorities. The sizes of these shares depend on the number of heirs involved in the succession. In the absence of heirs in law, then the estate is declared heirless, and passes to the Russian Federation.
A reserved portion is prescribed by the Civil Code of the Russian Federation.
The minor and disabled children of any deceased person domiciled in Russia, his/her disabled spouse and parents, and any disabled dependants of the deceased must inherit at least one half of their statutory intestate shares, notwithstanding any testamentary provisions. The residue of the estate outside the reserved portion may be freely willed without restriction. It can be inherited inter alia by any of the heirs in law or by any other persons.
A will is not the only form of testamentary provision allowed in Russian law.
In addition to the will, there is a legal instrument in the Russian Federation known as the "testamentary disposal of the monetary funds on the bank accounts" (hereinafter the "testamentary disposal"). To be valid in the Russian federation, the will and the testamentary disposal must be made in compliance with statutory requirements. The will must be made in person, in writing, and authorized by the notary public. The testamentary disposal must be made in written form in the bank branch were the account is maintained. Both the will and the testamentary disposal must be personally signed by the testator. Testamentary provisions can be made in favor of Russian or foreign living persons and legal entities.
Russian law allows the testator to appoint an executor who helps the heirs to implement a will. The executor may protect the property, receive any property which is owed to the deceased person, and include it in the inheritance. The executor can also perform other activities (e.g., pleading cases) connected with the implementation of the will.
An owner may legally dispose of his/her property before death.
There are no restrictions on the donation of property, providing that the owner is a physical person; however, the statutory provisions for donation in Russian law must be complied with, and the subject of the gift contract must be well determined A gift contract or transaction in respect of undetermined property is considered not concluded.
Gifts may be declared invalid after the donor´s death, in particular if the transaction was invalid when it was made e.g., due to its non-compliance with statutory provisions. If the gift recipient murders the donator, the heirs of the latter can challenge the gift transaction.
Owner´s rights in real property must be legally determined.
The owner of real property in the Russian Federation is usually determined in conformity with the Unified State Register of Rights in Real Property. There are some law concepts such as prescription or bona fide acquisition which result in property rights. The Russian doctrine of property is stricter than that in Anglo-Saxon countries, and there is no concept of "equitable ownership".
A regime of joint matrimonial property applies by operation of statute; however, this regime can be altered by the marriage contract. Russian law prescribes that the law of the country where the partners have their current or latest place of residence together is applicable to their property, and to their personal matrimonial rights. If they never lived together, the law of the Russian Federation is applicable only in Russian territory. These conflict rules are applicable to both real property and movables. Spouses can choose the law applicable to their rights under the matrimonial contract only if they have different nationalities or they do not live together.
The ownership of land by foreigners is restricted.
According to article 15 (3) of the Land Code of the Russian Federation, foreign nationals or legal entities are not permitted to own plots of land situated near the state boundary of the Russian Federation, in territories which are determined by the President, or situated in other territories, as determined by federal laws. If such land plots are inherited by a foreigner, then he/she must dispose of them within a time period of one year. The same restrictions apply to agricultural land.
Persons under legal age can inherit property.
Minors, including those who inherit property, must have special representatives prescribed by statute (such as parents, or guardians, tutors, or other persons determined by law). Children under fourteen are represented by guardians. Children from fourteen to eighteen must receive their tutors´ approval to effect transactions other than those allowed for them without any approval by the Civil Code of the Russian Federation. Neither guardians nor tutors can be appointed by a testator in a will. The representatives of minors are appointed by tutorship and guardianship (municipal) authorities according to the law of the Russian Federation.