New cafes are opening in shopping centers, and in street retail format. Market experts told us what problems a tenant faces when choosing premises to locate a catering outlet, and how best to decide on the location, square footage and rental rates.
Shopping centers vs street retail
To make a choice in favor of one or another premises, choosing between a shopping center or street retail, it is necessary to rely, first of all, on the concept of the future establishment, because both the work schedule and the target audience will depend on it. In the first case, family establishments will be more appropriate, in the second - craft bars, cafes with signature cuisine and various themed places.
An important factor may also be how long the cafe has been operating, whether it is looking for its first premises or is moving or even expanding its network. In other words, experience and financial reserves will become significant. “For aspiring entrepreneurs and startups, placement in street retail is more suitable than in a shopping center,” says Egor Ostapenko, director of the retail real estate department at Praedium. - Not every new project is able to immediately cope with fairly high rates in the shopping center and a large security deposit in 2-4 months.”
It is worth considering that district shopping centers usually offer several key formats. Ivan Tatarinov, commercial director of GLINCOM, notes that it is profitable and most in demand for small entrepreneurs who are ready to invest from 500 thousand rubles in opening a catering outlet. up to 1 million rubles is a coffee point. They work even in “weak” properties due to marginality, and they manage to break even in the first month of rent. The second format - food court - provides for a larger volume of investment, from 2.5 million rubles. “The most successful cafes in a food court exist next to a cinema and entertainment area. If there are no entertainment tenants around, you should approach the rental issue very carefully,” the expert clarifies.
When making a choice between a shopping center and street retail, it also makes sense to weigh the pros and cons of both types of placement. It is believed, for example, that it is easier to predict the average number of customers in a shopping center. “In street retail, you can also measure traffic, but it is less predictable, more dependent on weather conditions, and the quality of pedestrians may vary depending on the location,” explains Natalya Ozernaya, deputy head of the street retail department at JLL in Moscow. . The same applies to possible competitors: on the street they can set up door-to-door at any time and attract customers, while in a shopping center they usually try to maintain a balance of represented companies.
It is also important that premises in shopping centers are often equipped taking into account the requirements for catering, while the location in residential buildings involves a lot of finishing touches and necessary approvals from residents. In a residential building, it is also important to ensure that guests do not smoke close to the entrance and windows. If you make a choice in favor of street retail, then it will be in the place where a cafe or restaurant was previously open.
How much to take in “squares”?
Finding a room that would not be excessive in area, but would not be cramped for future guests of the establishment, is an extremely difficult task, and often practically impossible to solve without a specialist who designs restaurants and cafes. “There is a certain payment system, which is planned based on the establishment’s menu. The area depends, in particular, on whether the cafe has a kitchen full cycle or just pre-cooking, or are ready to do without a kitchen at all,” says Egor Ostapenko. In addition, the number of personnel and the size of the required premises for warehouses, refrigeration units, etc. are taken into account. The main hall in which visitors will sit is planned based on the size of the tables and the possible load. “It is also necessary to take into account the norms and rules, according to which the establishment must have a separate toilet for staff, a shower for cooks, and a place for changing clothes for employees,” adds Anton Belykh, CEO consulting company DNA Realty. “It will be extremely difficult to calculate this without experience.”
The volume of space will, of course, depend on both shopping centers and street retail formats, from which, ultimately, you will have to choose. “Coffee points can rent space from a counter of 3-4 sq.m to small premises of 20 sq.m. m. For a food court, the most popular area is in the range of 25-65 sq. m. m. If an entrepreneur opens a cafe as a franchise, then he is guided in choosing the area by the requirements of the owners already clearly stated in the French book,” explains Ivan Tatarinov.
In contrast to technological subtleties, the adequacy of the proposed rental rate can be judged independently by referring to the analytical calculations of market experts. According to Knight Frank, average rates for a cafe with an area of 200 sq. m in the center of Moscow can be 65-75 thousand rubles, and in top locations it can reach up to 90-120 thousand rubles. The average rate in residential areas is 40-45 thousand rubles. per sq. m per year. “Rates for premises in “sleeping rooms”, but in direct visibility from the metro, are often comparable to rates on central streets, precisely due to the daily flow of pedestrians from the metro,” notes Natalya Ozernaya, deputy head of the street retail department at JLL in Moscow.
Source: JLL
How to make a choice? Anton Belykh is sure: in no case should you set a psychological line - for example, “not pay more than a million rubles a month for rent.” “I know restaurants that pay 3-5 million a month for premises and still thrive. And there are establishments that pay 100 thousand and barely make ends meet or even operate at a loss,” explains the expert. - When assessing rental rates, you should take into account not your internal psychological limitations, but the real traffic of the place, its coincidence with yours target audience and make calculations of expected revenue using modern systems.”
Decide on location
When considering space in a shopping center, you can often come across prejudice against strong tenants in the neighborhood at the food court, especially the “big three”: McDonald's, Burger King, KFC. Ivan Tatarinov believes: “A high-quality and interesting product will not suffer from competition with strong global brands. For example, burger shops manage to very successfully differentiate themselves from similar offerings in the mass segment due to the author’s product and a more individual approach.”
Another erroneous belief is that cafes do well only in the center of Moscow. “There are also many successful establishments in residential areas and on outbound highways. Here it is necessary to take into account the specifics of the area. For example, in Perovo it is better to open something very budget-friendly, but on Michurinsky Prospekt a steakhouse will do just fine. Also, restaurateurs are interested in large residential areas with a huge amount of new housing, which is mainly bought or rented by the middle class,” says Anton Belykh.
In the street retail format traditionally good places for cafes are pedestrian zones, the number of which in the center of Moscow has recently increased. It’s good if there is a landmark or vacation spot nearby for city residents. Premises located near the metro are also in demand. "Promising, with high potential development, in my opinion, are premises in lofts located on the territories of former factories. A striking example is the opening of the Syrovarnya restaurant on the territory of the Badaevsky beer factory, which became an anchor and was joined by a number of other projects: Deep Space, The 12 Wine Bar, “ Summer garden“says Victoria Kamlyuk, director of street retail at Knight Frank.
As for the location in the center, here in last years Another important concern arises - reconstruction and landscaping work. Constant construction does little to attract customers, especially for cafes that would like to organize summer verandas. “You shouldn’t be afraid of street improvement work and don’t leave,” Victoria Kamlyuk is sure. “We need to negotiate with the landlord a discount of 10-30% for the duration of the reconstruction.” Yegor Ostapenko also fully agrees with the opinion that it is quite possible to “survive” the renovation: “Speaking of landscaping, it should be noted that if the establishment has a certain financial margin of safety, then it is better to wait out this period rather than move out. The reconstruction will end, the street will be transformed, and next season the cafe has a chance to recoup its losses and increase its income.”
The monthly rent for the use of the Premises and adjacent Areas and Parking Spaces (hereinafter referred to as the “Rent”) consists of:
Constant or fixed part of the rent
- Fixed part rent the amount of money charged for renting the Premises and including VAT 18%. The Fixed portion of the rent is calculated at the following rates per square meter of rented Premises:
- ___.00 rubles per month per square meter of rented area of Warehouse Premises, including VAT;___.00 rubles per month per square meter of rented area of Office and Amenity Premises, including VAT;
- ___.00 rubles per month per square meter of rented area Office premises, including VAT. The cost of the Fixed part of the rent includes the Services specified in the List of Services (Appendix No. 5). The cost of the Fixed part of the rent includes the use of the Property by the Tenant.
Variable part of the rent
The variable part of the rent includes (consumption limits are set in Appendix No. 6 - the amount of expenses for consumed electricity, calculated at the tariffs established by the organizations supplying the relevant services in accordance with meter readings (the amount of electricity provided, kW); - the amount of expenses for water consumption and sewerage, the calculation of which is carried out according to tariffs established by the organizations supplying the relevant services in accordance with the readings of metering devices or in accordance with the calculation of the consumption rate agreed upon by the parties. - the amount of expenses for telephony and Internet traffic, the calculation of which is made on the basis of tariffs, established in Appendix No. 6. Fees for the use of Parking Spaces. The Fee is calculated at the following rates: 7500.0 rubles per month, (not subject to VAT), for one Parking Space for trucks; 1500.0 rubles per month, (not subject to VAT) VAT) for one Parking Space for passenger vehicles.
Changing the rent in the lease agreement
The Lessor reserves the right to change the cost per square meter of the rented Premises on its own initiative, but not more than 1 (One) time per year from the Start Date of the lease and no more than 5% of the previous cost per square meter of the rented Premises, with prior notice to the Tenant not in less than 1 (one) month. In this case, the parties sign an additional agreement to this agreement. The lessor has the right to unilaterally increase the rate of the variable part of the rent depending on changes in the tariffs of organizations providing the relevant services. In this case, the Lessor attaches to the written notice of changes in the cost of utilities and operating services sent to the Tenant the relevant documents confirming the fact of changes in tariffs or cost of services.
We accept lease agreements for expert evaluation. We are engaged in drafting complex contracts.
The principle of freedom of contract allows us to establish a mechanism for determining the amount of rent that is convenient for the tenant and the landlord. This may be a fixed amount paid monthly, or an amount that includes reimbursement of maintenance costs for the leased facility. In the latter case, the wording of the contractual provision requires special attention.
The procedure, conditions and terms of payment of rent are determined by the lease agreement (clause 1 of Article 614 of the Civil Code), and in their absence, the procedure, conditions and terms of payment usually applied when leasing similar property under comparable circumstances are applied. A similar rule is established in paragraph 3 of Art. 424 of the Civil Code of the Russian Federation for the contract price: if it is not included in the text of the agreement, the execution of the contract must be paid at the price that, under comparable circumstances, is usually charged for similar goods, work or services.
But when concluding a real estate lease agreement, this rule cannot be applied, since rent is its essential condition (Article 432 of the Civil Code of the Russian Federation). In the absence of a condition agreed upon in writing by the parties regarding the amount of rent, the real estate lease agreement is considered not concluded (Article 654 of the Civil Code of the Russian Federation).
The terms of the rent must be formulated in such a way that it is possible to determine exactly when and in what amount the tenant is obliged to make the appropriate payments. The agreement may establish a fixed amount of rent or the procedure (mechanism) for its calculation. In the latter case, the rental agreement will also be considered agreed upon.
The amount of rent may be changed by agreement of the parties within the time periods specified in the contract, but not more than once a year, unless otherwise provided by the contract (clause 3 of Article 614 of the Civil Code of the Russian Federation). A change in the amount of rent in accordance with the mechanism provided for in the agreement does not constitute a change in the lease agreement, and, therefore, is not subject to the restrictions mentioned above (clause 11 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation dated January 11, 2002 No. 66, hereinafter referred to as Information letter No. 66). For example, the condition of indexing rent depending on inflation does not contradict this restriction. Although the amount of rent changes, the procedure for calculating it remains unchanged.
It is better to provide in the contract for the consequences of the loss of the lessor’s VAT payer status
It is recommended that the lease agreement specify whether the rent includes value added tax (VAT). And if it does, then it will also be necessary to determine which part of the specified amount is rent and which part is VAT. For example, indicate the current tax rate to avoid disputes in the future when the tax rate changes during the contract period. It is also recommended to indicate in the agreement that VAT is not charged on the rental amount if the lessor is not a payer of this tax.
All this must be done, since otherwise the parties may have disagreements regarding the amounts to be paid as rent. The position of the courts on this issue is ambiguous, and as a result, the lessor may receive rent in an amount less than expected (resolution of the Federal Antimonopoly Service of the West Siberian District dated September 17, 2010 in case No. A70-14225/2009), and the tenant may be forced to pay VAT in excess the amount of rent (Determination of the Supreme Arbitration Court of the Russian Federation dated February 10, 2010 No. VAS-1414/10 in case No. A51-7727/2009).
A situation is likely where initially the lessor was a VAT payer and in the contract the amount of rent was agreed upon taking into account the tax, but later the obligation to pay this tax ceased. For example, when the lessor switches to a simplified taxation system (clause 2 of Article 346.11 of the Tax Code of the Russian Federation) or in the event of a change in the owner of the leased property, if new owner is not a VAT payer. In this regard, it is in the interests of the tenant to include in the contract a condition that in the event of termination of the landlord’s obligation to pay VAT, the rent is reduced by the amount of the tax. If such a condition is not agreed upon, the court may refuse to satisfy the request for the return of overpaid rent in the amount of tax (resolution of the Federal Antimonopoly Service of the Volga-Vyatka District dated 05.08.2011 in case No. A43-24309/2010). At the same time, there is another position when the payment with the amount of VAT included in it is recognized as unjust enrichment of the lessor (resolution of the Federal Antimonopoly Service of the Volga-Vyatka District dated January 15, 2010 in case No. A29-2100/2009).
Rent may include fixed and variable parts
The rent cannot be established in the form of payment by the tenant for utilities (electricity, water, heat), fuel, lubricants and other materials consumed when using the leased property. The fact is that with such a payment, the lessor actually does not receive any remuneration from the tenant for the granted right to use the leased object, and this contradicts the paid nature of the agreement (clause 12 of Information Letter No. 66).
In order to reimburse the cost of utility services consumed by the tenant, the parties increasingly indicate in the agreement that the rent consists of two parts - constant and variable. The size of the constant part is determined as a fixed value (or the mechanism for calculating it), and the variable part is defined as the cost of utilities consumed by the tenant.
The condition defining the procedure for paying utility bills is an important point of the contract. After all, contracts with resource supply organizations are concluded by the lessor and invoices are issued in his name, and the lessee will have an obligation to reimburse such expenses if this is provided for in the agreement. Utility and other payments include the cost of water supply and sewerage services, telephone communications, consumed electricity, heat supply (gas supply), as well as fees for cleaning premises, garbage removal, etc.
Accounting for utility and operating payments as part of the rent is possible in several options. First, you can set a fixed rent, which already includes the cost of such payments. The tenant then pays a fixed rent each month. Secondly, it is permissible to determine the amount of rent without taking into account the cost of utilities, indicating the right of the tenant to independently enter into agreements with resource supply and service organizations. It should be taken into account that the conclusion of such agreements will entail the emergence of additional obligations for the tenant to such organizations. And thirdly, the parties have the right to establish a rent consisting of a fixed and variable part.
In the latter case, the rent consists of payment for the rented premises in a set amount (fixed part) and rent in terms of reimbursement of the cost of utilities actually consumed by the tenant (variable part).
It is better to fix the amount of the variable part of the rent for each month separately
In practice, the amount of rent in terms of reimbursement of the cost of electrical energy consumed by the tenant is determined either on the basis of the electricity meter readings, separately installed for the tenant, or on the installed power by taking into account the power of all electrical appliances operating in the premises and the approximate duration of their operation. The amount of water or gas consumed can also be determined by the meter. Calculation of the cost of heating services depends on the total heated area, calculated in cubic meters. Reimbursement of telephone communication costs is made on the basis of data on the status of the personal account provided by the communication organization.
To recognize a fixed part of the rent as an expense, the tenant only needs to have the lease agreement itself, in which it is defined. To recognize the variable part in expenses, a separate primary document is required, which will reflect the cost of utilities consumed by the tenant with a breakdown by type of service and with links to the relevant documents and the amount of the variable part of the rent for the month calculated in accordance with the lease agreement.
What is this primary document? When concluding an agreement, the parties to the lease agreement independently agree on this issue in relation to a specific situation. This can be a bilateral act, or a certificate from the landlord’s accounting department. The main thing is that the document used contains all the mandatory details listed in Art. 9 of the Federal Law of December 6, 2011 No. 402-FZ “On Accounting” (clause 1 of the letter of the Federal Tax Service of Russia dated February 4, 2010 No. ШС-22-3/86@).
If, in accordance with the agreement, the rent (or part thereof) is a variable amount, then in order to recognize this amount as an expense, the tenant must receive a primary document from the lessor every month, since the amount of the rent varies from month to month. And when the rent is determined in the contract at a constant (fixed) amount, monthly acts confirming the amount of payment are not needed, since the amount of the rent does not change.
It is worth remembering that difficulties may arise with the preparation of primary documentation, since the landlord is not a supplier of utility services to the tenant, but in fact acts as an “agent” of the tenant in transferring payments for services provided by resource supply organizations. For the landlord, these payments are not income, but serve as compensation for expenses.
Low and constant rental rates, the possibility of purchasing real estate, preferential programs - these are just the key advantages of Moscow. The number of tenants in the city is growing every year: for example, compared to 2016, in 2017 they were able to obtain real estate for favorable conditions 10% more entrepreneurs. In total, almost 6,000 property and land auctions were held last year. In 2018, all programs will continue to operate for tenants that allow them to significantly save on rent and achieve the purchase of city real estate. Don't miss the chance to get a room with a rental rate significantly lower than the market rate! Our article with a step-by-step analysis of the rental process and expert comments will help you understand the peculiarities of bidding.
Step one: choosing a property
Objects that are available for rent from DGI can be viewed on the website: https://investmoscow.ru/tenders or https://www.mos.ru/tender/function/zem-imush-torg/edinyy_spisok_torgov/. There are convenient filters to find non-residential premises in the desired area, the required area, with a specific purpose.
Important: Evaluate not only the premises, but also the conditions of the auction: what are the deadlines for accepting applications for participation, what is the size of the deposit. Download lot documentation and read the lease agreement. Check these important factors, as the possibility of subletting real estate, assigning rights of claim, early termination of the contract, etc.
Some entrepreneurs think that they are buying a “pig in a poke” by signing an agreement with DGI. As a lawyer who has worked in the real estate market for many years, I hasten to destroy this stereotype. On the contrary, all documentation on the object is presented in the public domain, starting from an extract from the Unified State Register of Real Estate and ending with a technical passport from the BTI. Objects are exhibited with a large number of photographs. Moreover: auction participants can agree on a personal inspection of the premises: for this you need to submit an application on the website no less than two days before the start of the auction https://investmoscow.ru/tenders.
Step two: register on the bidding site and submit an application
Entrepreneurs who participate in bidding for the first time must go through the registration procedure on the site. To do this, you will need to undergo accreditation, install certificates and a cryptographic information protection system on your PC. Entrepreneurs will need an electronic signature. We recommend starting the registration procedure at least a week before the deadline for accepting applications for the auction you are interested in.
If the legal entity is already registered, then you only need to submit an application to participate in the auction. Moreover, you will additionally need:
- Provide documents - an extract from the Unified State Register of Legal Entities or Unified State Register of Individual Entrepreneurs, copies of constituent documents and an extract from the authorized body that it approves the transaction. Documents confirming the authority of the person taking part in the auction are also required.
- Make a deposit - its amount is indicated in the bidding documentation. A payment document with a note from the bank regarding payment is attached to the application. The receipt must indicate the lot number, the date of the auction, the address and total area of the premises, and the amount of the deposit.
Important: why can an application to participate in a tender be rejected?
There are very few reasons why entrepreneurs are not allowed to auction: failure to pay a deposit, an incomplete set of documents, or violation of the requirements for drawing up auction documentation. Companies that are at the stage of bankruptcy or liquidation will also be excluded from participating in the auction.
Step three: participation in the auction
At the appointed time, you must take part in the auction on the site’s website. Minimum price becomes the one that was indicated in the documentation for the lot. The auction step is also specified in the documents - as a rule, it is 0.2% of the lot amount. If there is no bid within an hour, then the winner of the auction is the participant who offered the last amount. Once the tender protocols are posted on the website, they are recognized as valid.
Important: What if you are the only bidder in the auction?
In this case, bidding is simply not held: the city will offer to conclude a direct lease agreement on the terms published in the lot documentation.
Yakushev Anton, lawyer at RFI consult
Before participating in an auction, it is necessary to assess the risks. Thus, the deposit amount is not returned to the entrepreneur if he was the only participant admitted to the auction or made the maximum bid, but refused to sign the protocol or lease agreement.
Step four: conclusion of the contract
Between 10 and 20 days after the end of the auction, the entrepreneur must arrive at the Moscow City Property Department to sign a lease agreement for non-residential premises. At the same time, he must comply with all documentation and deposit requirements. The agreement cannot be changed unilaterally by either party. If the participant who takes first place avoids signing the contract, then instead of him DGI can offer rent to entrepreneurs who offered the second and third from the end amount.
Yakushev Anton, lawyer at RFI consult
Despite the simplicity of the rental procedure non-residential premises The Moscow Property Department has quite a lot of pitfalls that entrepreneurs are not aware of. For example, it is difficult to objectively assess the value of premises for a business and understand to what extent it makes sense to raise rates. Problems may arise when collecting documents, registering on the auction site, or participating in auctions. Finally, it is very important to have an attorney review the lease agreement and highlight all the pros and cons of the proposal.
Our clients are always satisfied with cooperation with RFI consult, since we provide turnkey services - from selecting premises according to the customer’s parameters and collecting documents for participation in preferential programs of the State Property Inspectorate, to signing an agreement with the Moscow Property Department. Customers receive real estate on a long-term lease basis at the best rate.
Publication
Property can be leased if it does not lose or change its natural properties during use. The lease agreement must contain data that makes it possible to definitely establish which property is to be transferred as the leased object. If under a lease agreement it is impossible to determine which property is being leased, then such an agreement is considered not concluded and the parties to such an agreement do not have any rights or obligations.
Only its owner has the right to rent out property. However, a person who is not the owner, but authorized by the owner to rent out property, can also act as a lessor.
The rental period of the property is determined by the contract. If the contract does not specify a period, then the contract is considered to be concluded for an indefinite period. In this case, each of the parties has the right to cancel the agreement at any time by warning the other party one month in advance, and when renting real estate - three months in advance. In this case, the agreement may establish a different period for warning of termination of the lease agreement for an indefinite period.
The lessor is responsible for all shortcomings of the leased property, even if he was not aware of them at the time of concluding the contract. If the tenant, after accepting the property, discovers certain shortcomings, then he has the right:
demand that the landlord eliminate them free of charge;
independently correct these shortcomings and demand reimbursement of your expenses for their elimination in a simultaneous payment;
eliminate the deficiencies on your own and deduct the amount of expenses incurred from the rent, notifying the lessor. The tenant also has the right to demand a proportionate reduction in the rent, and he can either eliminate or not eliminate the identified deficiencies;
not to eliminate the shortcomings, but to terminate the contract.
The lessor is not responsible for the defects of the leased property in the case where these defects were agreed upon when concluding the lease agreement or were known to the tenant in advance or should have been discovered by the tenant during an inspection of the property or checking its serviceability when concluding the agreement or transferring the property for rent .
Payment of utilities by the tenant
The lease agreement is a compensation agreement. The amount of rent and payment terms are determined by the contract. In addition, the tenant is required to pay utilities for the leased property. There are several possible ways for the tenant to reimburse utility costs:
fixed rent, which includes the cost of utilities. The tenant pays the landlord rent every month in the amount specified in the contract;
rent consisting of constant and variable parts, in particular, a constant rent is a payment for the area of the rented premises, a variable rent is a payment for utilities;
rent excluding the cost of utilities. The tenant independently enters into agreements with utility services, or an agency agreement can be used to reimburse utility costs.
Rent including the cost of utilities
Rent including utility payments causes the least amount of controversy with the tax authorities, but is a less profitable option. The cost of some services directly depends on the size of their consumption, and it is not always possible to determine in advance how much, for example, electricity a tenant will consume. Therefore, a situation may arise when the utilities actually consumed by the tenant are not covered by the amount of utility payments included in the rent.
Lessor's account. Rent, including utility bills, is income from the sale of services for leasing premises. The object of taxation is the sale of services for the provision of property for rent.
In this case, the entire amount of the rent is payment for the services of the lessor in providing the property for rent. Therefore, the landlord must calculate VAT on the full amount of the rent and issue an invoice to the tenant for the full amount of the rent. At the same time, there is no need to highlight the amount of utility payments in a separate line in the invoice and invoice for payment to the landlord (letter of the Ministry of Finance of Russia dated September 19, 2006 No. 03-06-01-04/175).
As for the VAT amounts presented by utility service providers, the lessor can deduct them in full in the generally established manner, since services are purchased for transactions subject to VAT (provision of property for rent) (FAS resolutions Northwestern district dated 10.01.07 No. A05-7971/2006-13, FAS North Caucasus District dated 07.11.07 No. F08-6607/07-2723A - left in force by the Determination of the Supreme Arbitration Court of the Russian Federation dated 29.02.08 No. 2615/08).
Tenant's account. The tenant, by paying the rent, which includes utility bills, reimburses the landlord for the cost of utility expenses. Since the lessor has issued an invoice for the entire amount of the rent, the tenant has the right to deduct the entire amount of VAT related to the rent, including utilities (resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated March 10, 2009 No. 6219/08, FAS Moscow District dated April 24, 2009 No. KA-A40/3091-09).
Thus, the tenant has the right to deduct VAT if the rent includes a fixed part and a variable part equivalent to the amount of utility bills.
Rent consisting of fixed and variable parts
This method of reimbursing the landlord’s utility expenses causes the most controversy regarding the issues of accepting VAT amounts for deduction by both the landlord and the tenant.
Lessor's account. On the question of whether the lessor has the right to deduct VAT amounts on services consumed by the tenant, there are two positions. According to the first position, the lessor can deduct only that portion of the VAT that relates to the cost of the utilities he personally consumed. The landlord does not sell utilities and does not receive revenue from this operation, so he does not have to issue an invoice to the tenant for the amount of utilities he consumes. Consequently, upon receipt of funds transferred by the tenant to the landlord in order to compensate the landlord’s expenses for paying for these services, there is no VAT subject to taxation (letters of the Ministry of Finance of Russia dated December 31, 2008 No. 03-07-11/392, December 26, 2008 No. 03-07- 05/51, Federal Tax Service of Russia for Moscow dated May 21, 2008 No. 19-11/48675, resolution of the Federal Antimonopoly Service of the Volga Region dated March 4, 2008 No. A65-8421/2007-SA1-37, FAS Central District dated 02.14.08 No. A48-1629/07-6, Determination of the Supreme Arbitration Court of the Russian Federation dated 01.29.08 No. 18186/07).
In addition, the landlord does not have the right to reissue invoices to the tenant, since in this case he is not an intermediary between the tenant and the service provider and, therefore, is not subject to the provisions of paragraphs 3 and 7 of the Rules for maintaining logs of received and issued invoices , purchase books and sales books when calculating value added tax.
Therefore, it follows that the lessor:
accepts for deduction only that part of the VAT that falls on the share of services consumed by him;
VAT, which accounts for the share of services consumed by the tenant, is included in the cost of these services;
presents the tenant with the cost of utilities including VAT (provided by the utility services).
However, there is another position: the lessor in such a situation has the right to apply a deduction (FAS resolutions Ural district dated 12/11/08 No. Ф09-9211/08-С2, Federal Antimonopoly Service of the Central District dated 03/28/07 No. A48-4688/06-19). The arguments for this position are as follows. The lessor is obliged to provide the premises for rent in the condition established by the contract, i.e. in a condition suitable for use. The landlord enters into contracts with utility services, which present him with the VAT amount and issue an invoice for the cost of services provided. Thus, the purchase of utilities by the landlord is one of the necessary conditions for renting out the premises. Consequently, these services are purchased to carry out transactions subject to VAT, since services for leasing property are subject to VAT.
If the lessor fulfills all the conditions necessary for applying a tax deduction, then he has the right to accept the entire amount of VAT presented by utility service providers for deduction in full. In this case, for reimbursement to the tenant, he presents the cost of utilities without taking into account the VAT presented by the utility services.
Tenant's account. There are also two positions on the issue of the legality of the tenant’s use of VAT deductions.
According to the first position, the tenant cannot apply the deduction, since the landlord does not have the right to issue him an invoice. Thus, the tenant does not comply with one of the conditions for the emergence of the right to deduction, established by paragraph 1 of Art. 172 of the Tax Code of the Russian Federation (letters of the Ministry of Finance of Russia dated March 24, 2007 No. 03-07-15/39, Federal Tax Service of the Russian Federation for Moscow dated July 16, 2007 No. 19-11/067415, resolutions of the Federal Antimonopoly Service of the West Siberian District dated September 1, 2008 No. F04- 5318/2008(10782-A46-40), 03.24.08 No. F04-2074/2008(2736-A45-41).
If the lessor does not issue an invoice, then the amount of VAT attributable to the share of consumed utilities can be taken into account by the lessee as part of expenses. According to the second position, the tenant has the right to deduct the amount of VAT on the basis of re-issued invoices, subject to compliance with other requirements established by clause 2 of Art. 171, paragraph 1, art. 172 of the Tax Code of the Russian Federation (resolutions of the Federal Antimonopoly Service of the Moscow District dated March 17, 2009 No. KA-A40/1688-09, December 25, 2008 No. KA-A40/12036-08-p, the Presidium of the Supreme Arbitration Court of the Russian Federation dated February 25, 2009 No. 12664/08). Arguing its decision, the court indicated that use of the rented premises is possible only if it is provided with heat, light, water, etc. Therefore, the provision of utilities is inextricably linked with the provision of rental services.
Rent excluding the cost of utilities
In this case, the tenant enters into a separate agreement to pay for utilities. At the same time, in order for his rights not to be violated, the landlord must approve the method of mutual settlements between the tenant and utility services.
Since the tenant works directly with utility services, invoices are issued to him and not to the landlord, so he has the right to deduct VAT on utility costs.
Agency agreement as one of the ways to pay for utilities between the landlord and the tenant
To process compensation for utility payments, many organizations enter into an agency agreement, according to which the landlord acts as an agent and the tenant as a principal. Acting as an intermediary between utilities and the tenant, the landlord can reissue the tenant an invoice received from utilities, and the tenant - to deduct the VAT indicated in this invoice.
Since the lessor does not carry out transactions for the sale of utilities, he does not have obligations to calculate and pay VAT. However, he becomes obligated to pay VAT on the value of his remuneration. An intermediary agreement is paid, therefore, it is advisable for the parties to such an agreement to provide for the payment of remuneration for the lessor performing the functions of an intermediary.
On the issue of applying a VAT deduction by a tenant from the cost of utilities paid through an intermediary landlord, decisions of arbitration courts are ambiguous. For example, the resolution of the Federal Antimonopoly Service of the Moscow District dated September 25, 2008 No. KA-A40/8932-08 states that the tenant has the right to apply a deduction for utilities paid through an intermediary landlord. If the tenant has an invoice reissued by the landlord for payment of utility services received from specialized organizations, then he has the right to deduct the amount of VAT on utility costs, subject to compliance with other requirements established by clause 2 of Art. 171, paragraph 1, art. 172 of the Tax Code of the Russian Federation (see also the resolution of the Federal Antimonopoly Service of the North-Western District dated 09/08/08 No. A66-109/2008).
However, the resolution of the Federal Antimonopoly Service of the West Siberian District dated August 27, 2008 No. Ф04-5231/2008(10532-А03-25)) states that the mediation agreement actually determines the procedure for reimbursement of utility costs. Since the landlord does not sell utilities, therefore, this operation is not subject to VAT, and the tenant does not have the right to deduct the amount of VAT according to the re-issued invoices.
Leasehold improvements
During the lease term, the tenant may make repairs to the rental property. Improvements are divided into separable and inseparable.
Separable Improvements
Separable improvements include improvements that can be separated from the leased property without causing harm and subsequently used separately from it. Separable improvements to the leased property made by the tenant are his property, unless otherwise provided by the contract (Article 623 of the Civil Code of the Russian Federation).
Income tax. The lessee's investments related to the production of separable improvements form the cost of a separate fixed asset item in his accounting. Depending on the cost and period of use of the improvements, the tenant's expenses for their implementation are recognized as costs for the acquisition of depreciable property or are included in its current expenses.
If the initial cost of improvements is more than 20,000 rubles, their useful life exceeds 12 months, and the improved object is used to generate income, separable improvements are recognized as depreciable property. The tenant pays off the cost of these improvements by calculating depreciation.
The lessee begins to accrue depreciation on separable improvements taken into account as part of the depreciable property from the 1st day of the month following the month in which this improvement was put into operation.
For separable improvements, the lessee has the right to apply a depreciation bonus by simultaneously including in the expenses of the reporting or tax period the costs of capital investments in the amount of no more than 10% (for fixed assets belonging to the third to seventh depreciation groups - no more than 30%) of the initial cost of the separable improvements. The possibility of applying bonus depreciation must be provided for in the taxpayer's accounting policy.
VAT. The tenant has the right to deduct VAT presented as part of the cost of separable improvements if all the conditions provided for in Art. 171 and 172 of the Tax Code of the Russian Federation. Separable improvements must be used in activities subject to VAT, they must be taken into account and have an invoice with the allocated tax amount.
Property tax. In accounting, the tenant's expenses for the creation (purchase) of separable improvements form the initial cost of an item of fixed assets or inventories. The cost of separable improvements included in inventories is written off as an expense at the time of commissioning. To ensure the safety of these objects, it is advisable to organize proper control over their movement.
Separable improvements that the tenant records as fixed assets must be included in the property tax base. If separable improvements are accounted for as inventories, then they are not subject to property tax.
Inseparable improvements
Inseparable improvements that cannot be separated from the leased object itself are recognized as the property of the lessor and are transferred to him at the end of the lease term. Improvements to the leased property may be made with or without the consent of the lessor. In this case, the cost of inseparable improvements made without the consent of the lessor is not reimbursed. The cost of permanent improvements made at the tenant's own expense and with the consent of the landlord must be reimbursed by the landlord upon termination of the lease.
Income tax. Capital investments leased fixed assets in the form of inseparable improvements made by the lessee with the consent of the lessor are recognized as depreciable property.
These capital investments are depreciated in the following order:
capital investments, the cost of which is reimbursed to the lessee by the lessor, are depreciated by the lessor in the manner established by Chapter. 25 Tax Code of the Russian Federation;
capital investments made by the lessee with the consent of the lessor, the cost of which is not reimbursed by the lessor, are depreciated by the lessee during the term of the lease agreement, based on depreciation amounts calculated taking into account the useful life of the leased fixed assets.
Lessor's account. In the tax accounting of the lessor, the cost of gratuitously received inseparable improvements that are not reimbursed to the lessee is not recognized as taxable income due to subclause. 32 clause 1 art. 251 Tax Code of the Russian Federation. At the same time, the lessor has no right to increase the initial cost of the leased item returned to him by the amount of inseparable improvements. In addition, the lessor cannot separately depreciate capital investments in the form of permanent improvements made without his consent and subsequently transferred to him free of charge. This right is granted to the landlord only on the condition that he reimburses the tenant for the cost of the improvements made.
In accordance with paragraph 1 of Art. 258 of the Tax Code of the Russian Federation, capital investments, the cost of which is reimbursed by the lessor to the lessee, are depreciated by the lessor in the general manner. Depreciation begins on the 1st day of the month following the month in which the depreciable property in the form of inseparable improvements was put into operation.
The lessor must be guided by the general procedure for calculating depreciation after an increase in the original cost of the property, i.e. all conditions must be met, as if capital investments in the form of reconstruction (modernization) were carried out by the lessor himself. In addition, the lessor has the right to take advantage of the depreciation bonus and write off at a time up to 10% (30% for leased objects belonging to depreciation groups 3–7) of the costs of capital investments in the form of inseparable improvements.
Tenant's account. The lessee may depreciate the inseparable improvements made by him to the leased property if two conditions are met:
capital investments were made with the consent of the lessor;
the cost of capital investments made is not reimbursed by the lessor.
If these conditions are met, capital investments made by the lessee in the form of inseparable improvements to the leased property are amortized by the lessee during the term of the lease agreement.
Capital investments in the form of inseparable improvements made by the tenant are inextricably linked with the leased object itself, therefore, to calculate the depreciation rate for them, the useful life established by the Classification of fixed assets for the leased object is used (letter of the Ministry of Finance of Russia dated May 14, 2008 No. 03-03-06 /2/52).
Thus, when determining the useful life, the lessee must be guided by the terms established for the depreciation group into which the leased object falls. It is on the basis of this period that the amount of depreciation for the inseparable improvements made will be calculated (letter of the Ministry of Finance of Russia dated May 14, 2008 No. 03-03-06/2/52).
If an organization rents, for example, premises in a building belonging to the 10th depreciation group and makes inseparable improvements to these premises, then the useful life of the improvements made will have to be determined in accordance with the 10th depreciation group. The minimum possible useful life in this situation would be 361 months. (lower limit for the 10th depreciation group).
Depreciation is accrued by the tenant from the next month after the improvements he made were put into operation. After the lease term ends and the leased object is returned to the lessor, depreciation ceases. If the useful life of the leased property is longer than the term of the lease agreement, then part of the cost of capital investments in the form of inseparable improvements will not be depreciated, therefore, the lessee will not be able to recognize part of the costs of the inseparable improvements made.
As for the application of the depreciation bonus, for capital investments in leased fixed assets, a special procedure for calculating depreciation is established, provided for in paragraph 1 of Art. 258 of the Tax Code of the Russian Federation, therefore, the rules for applying depreciation bonuses for inseparable improvements do not apply to the tenant (letters of the Ministry of Finance of Russia dated May 22, 2007 No. 03-03-06/2/82, May 24, 2007 No. 03-03-06/1/302).
Inseparable improvements made by the tenant without the consent of the landlord are not subject to depreciation. According to paragraph 1 of Art. 256 of the Tax Code of the Russian Federation, capital investments in the form of inseparable improvements in leased fixed assets are included in depreciable property only if these improvements have been agreed upon with the lessor.
If, under the terms of the agreement, the lessor, at the end of the lease period, reimburses the tenant for the residual value of the improvements made by him, the amount of compensation will be included by the tenant in income (as part of sales proceeds), and the residual value of the improvements will be taken into account as expenses on the basis of Art. 268 of the Tax Code of the Russian Federation (letters of the Ministry of Finance of Russia dated 03/07/08 No. 03-03-06/1/159, 02/05/08 No. 03-03-06/2/12).
Methods for calculating depreciation. Since 2009, depreciation for all depreciable property items has been calculated in the manner specified in the organization’s accounting policies. However, in paragraph 3 of Art. 259 of the Tax Code of the Russian Federation lists types of property that are always depreciated only using the straight-line method: buildings, structures, transmission devices included in the eighth to tenth depreciation groups.
If the tenant will depreciate capital investments in leased property, which belongs to the eighth to tenth depreciation groups, then depreciation on them will have to be calculated using the straight-line method. The nonlinear method cannot be applied to such capital investments (letter of the Ministry of Finance of Russia dated May 10, 2006 No. 03-03-04/1/441).
With both the linear and non-linear methods, the lessee accrues depreciation on inseparable improvements from the 1st day of the month following the month in which the property was put into operation.
Depreciation period. For a tenant who has made inseparable improvements to the leased property, it is fundamental how the relations of the parties are formalized at the end of the lease agreement. If the contract is extended (renewed), then the original contract under which the improvements were made remains in effect. Consequently, the tenant, even after the extension, can continue to charge depreciation on the improvements he has made (letter of the Ministry of Finance of Russia dated March 20, 2007 No. 03-03-06/1/167).
If the parties renew the lease agreement, then the previous agreement terminates and a new agreement comes into force. In this case, the tenant loses the right to amortize the improvements made by him under the old lease agreement, which has ceased to be valid (letter of the Ministry of Finance of Russia dated October 8, 2008 No. 03-03-06/2/140).
VAT. The transfer to the lessor of inseparable improvements to the leased premises, made by the lessee on its own or with the involvement of contractors, is subject to VAT, and he is obliged to present for payment to the lessor the amount of VAT on the cost of inseparable improvements (letter of the Ministry of Finance of Russia dated August 29, 2008 No. 03-07-11/290) .
The tenant is obliged to charge VAT and draw up an invoice regardless of whether such transfer takes place on a paid (including against rent) or gratuitous basis and who carried out the work - the tenant or the contractor (FAS PO resolution No. A12 dated June 24, 2008 -18629/07, Far Eastern Education Department dated 10.20.08 No. F03-4340/2008).
At the same time, the FAS Moscow District, in its resolution dated September 30, 2008 No. KA-A40/9153-08 in case No. A40-5452/08-108-22, indicated that inseparable improvements to the leased premises are the property of the lessor, therefore their transfer cannot be recognized implementation, and the object of VAT taxation does not arise (see also the resolution of the Federal Antimonopoly Service of the North-Western District dated 04/21/06 in case No. A56-7638/2005).
Transfer of ownership of goods, work performed, services provided free of charge is recognized as the sale of goods (work, services). Thus, transactions involving the gratuitous transfer of inseparable improvements by the tenant are included in turnover subject to VAT (as transactions involving the transfer of work results).
VAT must be charged at the moment when the inseparable improvements are transferred to the lessor. As a rule, such a transfer occurs at the end of the lease agreement, when the leased property (together with inseparable improvements) is returned to the lessor. When transferring permanent improvements to the lessor, the lessee is required to issue an invoice and register it in the sales book.
Since the gratuitous transfer of inseparable improvements is subject to VAT, the tenant has the right to deduct the VAT paid by him when making inseparable improvements. To do this, he must fulfill the conditions provided for in Art. 171 and 172 of the Tax Code of the Russian Federation (resolution of the Federal Antimonopoly Service of the Moscow District dated 02.13.07 and 02.19.07 No. KA-A40/450-07 in case No. A40-31107/06-116-180). In turn, the lessor will not be able to deduct VAT on inseparable improvements received free of charge. After all, with a gratuitous transfer, the tenant does not present the amount of VAT to the lessor for payment based on the invoice (letter of the Ministry of Finance of Russia dated March 21, 2006 No. 03-04-11/60).
Property tax. Capital investments made by the tenant in the form of inseparable improvements to leased objects, accounted for as part of the tenant's fixed assets, reimbursed (not reimbursed) by the lessor, are subject to property tax until their disposal under the lease agreement (letter of the Ministry of Finance of Russia dated October 24, 2008 No. 03- 05-04-01/37). It is advisable for the tenant not to wait for the end of the lease term and to transfer the improvements made to the landlord immediately after completion of the work. This will allow the tenant to avoid disagreements with the tax authorities.
In the lessor's accounting, inseparable improvements made by the lessee increase the initial cost of the leased item or are accounted for as a separate fixed asset item. With any of the accounting options, the lessor is required to pay property tax on the cost of improvements. It includes the cost of inseparable improvements in the property tax base, starting from the moment when the improvements are received from the tenant under the transfer and acceptance certificate or other similar documents.
Lessor – foreign organization
A foreign company that owns a property in Russia by right of ownership can act as a lessor of non-residential premises.
According to regulatory authorities, leasing of property by a foreign organization can lead to the formation of a permanent representative office if it is carried out on a systematic basis (order of the Ministry of Taxes of Russia dated March 28, 2003 No. BG-3-23/150, letter of the Federal Tax Service of Russia for Moscow dated January 19 .07 No. 20-12/05685).
Rent received by a foreign organization is subject to income tax at a rate of 20%.
Transactions involving the leasing of real estate located in Russia by a foreign company are subject to VAT in accordance with the generally established procedure.
When a foreign organization acquires ownership of real estate on the territory of Russia, it becomes a payer of property tax and is obliged to register with the tax authority. Consequently, when leasing such property, it must independently calculate and pay VAT on the rent to the budget.
Moreover, if the leasing of real estate by a foreign company is not regular, then this activity is not recognized as entrepreneurial. Consequently, the responsibilities for calculating and paying income tax and VAT to the budget are assigned to the Russian organization (tenant), recognized as a tax agent. In turn, if the activity of a foreign company in leasing real estate forms a permanent establishment, then the responsibilities for calculating and paying income tax and VAT to the budget are assigned to the representative office.
Renting housing for employees - foreign citizens
Companies employing the labor of foreign citizens can provide them with free housing or pay monetary compensation to pay for the rent of an apartment for the period of their employment. The question of whether in this case income subject to personal income tax arises for a foreign worker, and the object of UST taxation is controversial.
There are two positions. According to the first position, when an employer provides housing to a foreign citizen as provided for in an employment contract, income arises that is subject to personal income tax and unified social tax.
The second position is that taxable income does not arise for foreign citizens when an employer provides housing, since free provision of housing refers to compensation that is not included in the wage system and its purpose is to reimburse employees for costs associated with performing work duties. Payment for housing should be considered as a type of expense for settling into a new place of residence.
The employer is obliged to reimburse expenses when an employee moves to work in another area, including expenses for settling into a new place of residence. Reimbursement of these expenses is compensation to the employee related to the performance of his work duties. Accordingly, the object of UST taxation does not arise (Resolution dated 12.05.2008 N 09AP-3569/2008-AK).
Compensation payments related to the free provision of residential premises are also not subject to personal income tax. Since the obligation to provide housing is assigned to the employer, no taxable income arises when paying for housing to foreign employees (resolution of the Ninth Arbitration Court of Appeal dated May 12, 2008 No. 09AP-3569/2008-AK, FAS Central District dated December 11, 2007 No. A48-717/ 07-2, Determination of the Supreme Arbitration Court of the Russian Federation dated April 23, 2008 No. 4623/08).
Comments
09/21/2015 Lyudmila
The conclusion of an Agency Agreement is generally problematic, because contracts for utility services have already been concluded at the time the operation of the real estate begins, and tenants (aka Principals) appear and change later. Such an Agency Agreement (letter of the Ministry of Finance of Russia dated April 14, 2011 No. 03-11-06/2/55) can be challenged by the inspectorate
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