But only if they use escrow accounts
Good news for citizens who want to hire contractors to build their cottage or summer house — Russian President Vladimir Putin signed a law abolishing VAT for developers of private houses using escrow. The legislative initiative is intended to reduce the cost of construction work.
Changes to the Tax Code of the Russian Federation will allow not to pay VAT for the services of construction companies working under a contract using escrow accounts. We are talking about the construction of housing on plots owned by citizens. According to experts, the innovations will reduce the cost of building private houses and, as a result, increase the availability of such facilities for Russians. The corresponding law will come into force on April 1, 2025.
Recall that the escrow mechanism in individual housing construction assumes that the money from the customer goes to a special bank account and is kept there until the end of construction. The contractor can receive it only after the facility is put into operation, and he carries out the work himself using credit or his own funds.
Earlier, the Federation Council approved a package of laws creating a legal framework for the use of escrow accounts in private housing construction in the Russian Federation. In particular, they define the concepts of «contractor», «customer», «house kit», «authorized bank». Contractors working in the suburban housing market using escrow now have the opportunity to apply for a preferential loan in authorized banks at a rate of no more than 1% per annum. The list of banks that will allow opening such accounts is the same as for escrow accounts in new buildings.
According to the adopted amendments, a citizen of the Russian Federation will be able to choose a house kit, which will be standardized and consist of structures manufactured in a factory. After purchase, such a house kit is installed by the contractor (legal entity or individual entrepreneur), who must register in the housing construction information system.
In conclusion, we will add that funds placed in an escrow account are subject to insurance. If necessary, payment of insurance compensation under the escrow account must be made by the DIA within 20 working days from the date of submission of the necessary documents by the beneficiary.