Alina Esmanskaya told Novy Prospect about the impact of the key rate increase on existing mortgages

Alina Esmanskaya, Associate of Private Wealth Practice at Maxima Legal, has helped Novy Prospect online publication to understand how the recent decision of the Central Bank to sharply increase the key rate from 9.5% to 20% will affect the existing mortgage loans.

“As a general rule, banks are not entitled to unilaterally revise the terms of the contract, but this is possible due to changed economic conditions or in the case of a floating-rate loan.

Against this backdrop, the need to pay additional tax on mortgages has emerged. Thus, the legislation provides for a rule according to which a natural person’s income in the form of material benefit is subject to taxation. Material gain is recognised as interest savings received for the use of the loan if it was received from the organisation or individual entrepreneur with whom the individual has an employment relationship. It arises if the rate on the loan agreement is below 2/3 of the Central Bank key rate (or below 13.3% at 20% key rate) and is taxable as personal income tax at 35%.

This is not a new rule and has been in force for about 4 years. But such questions have not arisen because the interest rate on loans was higher than the key rate. Only bank employees fall under this regulation,” the expert said.

To read the full article (in Russian) please visit Novy Prospect website >>>