DETERMINATION OF MARKET PRICE FOR TAX PURPOSES USING INDEPENDENT VALUATION

The Ministry for Taxes and Levies of the Republic of Belarus considered the issue of using independent valuation results when determining market price for tax purposes and on   03.02.2020 provided its viewpoint to this effect.

 Article 88 of the Tax Code of the Republic of Belarus determines the transactions that are subject to control for compliance with market prices: these are transactions carried out with affiliated persons, with payers applying special tax treatments, for sale or purchase of real estate (part of it), as well as housing bonds in circulation. To find out whether the profit tax base or amount of loss were determined correctly while determining market prices, information on market value of the subject property determined in accordance with the legislation on the ground of the actual market prices for goods in the comparable tax period is used.

 Relations arising in the course of activities on valuation of objects of civil rights are governed by the Regulations on valuation of objects of civil rights in the Republic of Belarus approved by the Presidential Decree of the Republic of Belarus of 13.10.2006 No. 615 (hereinafter – the Regulations).

 According to sub-clause 3.1 clause 3 of the Regulations value of the subject property can be determined by using market valuation method, including comparative method based on comparison and taking into account the differences between the subject property and comparable property which is similar to the subject property in the main economic, technical, manufacturing and other characteristics. By reference to the approaches set forth in Chapter 11 of the Tax Code, this valuation method seems like the most possible method to be used to determine value of real estate on the ground of the actual market prices for identical (in the absence thereof - similar) goods.

In this regard, in order to use information on market value of real estate determined on the results of independent valuation for the purpose of clause 1 Article 90 of the Tax Code, the Ministry for Taxes and Levies of the Republic of Belarus recommends to pay consideration to the following valuation terms and conditions when concluding an agreement on providing independent valuation services and accepting the results of such valuation:

1. when concluding such an agreement, it is recommended to specify the purpose of valuation, for example, “other purposes not inconsistent with law - for determination of taxable profit from sale/purchase of (to indicate property involved in a transaction) for compliance with the established market prices for identical (similar) real estate in comparable conditions”;

2. an agreement on providing valuation services and/or valuation engagement  should stipulate that market valuation of real estate is made by applying only  the comparative method; 

3. when accepting the results of independent valuation services rendered, it is necessary to make sure that the valuation report comprises the following information:
• description of the subject property (technical and other one, including the list of restrictions (encumbrances) on rights to the subject property, if any);
• data used for valuation, with indication of sources of such data;
• analysis of data used for valuation;
• basic assumptions and limitations taken into account during valuation;
• analysis of the markets of analogous subject property;
• calculations and their substantiation, description of the procedure for determination of value by the comparative method and by selected methods for calculation of value.

4. a company that uses the results of independent valuation to substantiate the market price shall provide the conclusion of value and valuation report to the tax authority during their control measures.

Valuation firm “Valuers’ Collegia” provides valuation of:
• REAL ESTATE
• EQUIPMENT 
• VEHICLES
for any purpose, including purposes of taxation.

Tel.       +375 (44) 7-087-087‬
            +375 (44) 7-097-097
E-mail: ocenka@collegia.by