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Is mortgaged property subject to tax?
Is mortgaged property subject to tax?
As in previous years, this year has also seen a certain level of price increases in the housing market. In general, these increases tend to occur around September, coinciding with the beginning of the academic year. Citizens who wish to purchase housing but cannot afford to pay in cash tend to prefer buying property through mortgage arrangements. The price of apartments and other properties acquired under mortgage terms can be paid in installments to banks or construction companies. In such cases, the question arises: Is tax required to be paid on mortgaged property? Are there any exemptions in this area? Expert Vugar Bayramov answered our questions on the matter.
If the property is mortgaged and legally owned by the bank, the individual residing in that apartment is not required to pay property tax:
"According to the Tax Code, individuals must pay property tax to the municipalities, while legal entities pay it to the tax department. However, if the mortgaged property is under the bank's control, the individual living in the apartment is not obliged to pay tax to the municipality. Therefore, the citizen must obtain a certificate confirming that they reside in a mortgaged property. In this case, since they do not own or control any property, they may be exempt from paying property tax."
The expert also noted that, on the other hand, there is still property being used by the citizen:
"There are certain nuances regarding the use of the property. If the property is under the bank’s control, then as a legal entity, the bank itself handles the payment of property tax. As you may know, for individuals, various coefficients have been set for the payment of property tax on both residential and non-residential properties.
According to the coefficients approved by the Cabinet of Ministers, individuals are required to pay property tax on their privately owned residential and non-residential properties as follows: In Baku: — 0.4 AZN per square meter In Ganja, Sumgayit, and the Absheron district: 0.3 — AZN, In other cities (excluding those subordinate to districts) and district centers: — 0.2 AZN, In towns, settlements, and villages subordinate to districts (excluding towns and villages in Baku, Sumgayit, and the Absheron district): — 0.1 AZN
In practice, if the property is not owned by the individual but is under the bank’s control, and if the contract specifies that the tax is to be paid by the bank, then the individual residing in that home is exempt from paying property tax."
As in previous years, this year has also seen a certain level of price increases in the housing market. In general, these increases tend to occur around September, coinciding with the beginning of the academic year. Citizens who wish to purchase housing but cannot afford to pay in cash tend to prefer buying property through mortgage arrangements. The price of apartments and other properties acquired under mortgage terms can be paid in installments to banks or construction companies. In such cases, the question arises: Is tax required to be paid on mortgaged property? Are there any exemptions in this area? Expert Vugar Bayramov answered our questions on the matter.
If the property is mortgaged and legally owned by the bank, the individual residing in that apartment is not required to pay property tax:
"According to the Tax Code, individuals must pay property tax to the municipalities, while legal entities pay it to the tax department. However, if the mortgaged property is under the bank's control, the individual living in the apartment is not obliged to pay tax to the municipality. Therefore, the citizen must obtain a certificate confirming that they reside in a mortgaged property. In this case, since they do not own or control any property, they may be exempt from paying property tax."
The expert also noted that, on the other hand, there is still property being used by the citizen:
"There are certain nuances regarding the use of the property. If the property is under the bank’s control, then as a legal entity, the bank itself handles the payment of property tax. As you may know, for individuals, various coefficients have been set for the payment of property tax on both residential and non-residential properties.
According to the coefficients approved by the Cabinet of Ministers, individuals are required to pay property tax on their privately owned residential and non-residential properties as follows: In Baku: — 0.4 AZN per square meter In Ganja, Sumgayit, and the Absheron district: 0.3 — AZN, In other cities (excluding those subordinate to districts) and district centers: — 0.2 AZN, In towns, settlements, and villages subordinate to districts (excluding towns and villages in Baku, Sumgayit, and the Absheron district): — 0.1 AZN
In practice, if the property is not owned by the individual but is under the bank’s control, and if the contract specifies that the tax is to be paid by the bank, then the individual residing in that home is exempt from paying property tax."