Nikita Deynega commented for Vot-tak.tv the problem of defining the type of assets for the taxation purposes

Over the past few years, the number of cases involving the definition of the type of property has increased in Russian court practice. The situation is caused by a difference in the interpretation of objects as movable or immovable property by tax authorities and business representatives. It should be reminded that from 2019 only immovable property is taxable. Two criteria must correspond: the property must be defined as immovable in terms of civil law and it must be an item of property, plant and equipment in terms of accounting.

Nikita Deynega, Head of Tax and Administrative Law Practice at Maxima Legal, pointed this out to Vot-tak.tv that “both taxpayers and tax authorities started trying to use the existing uncertainty for their own, controversial interests: the former sought to recognize the maximum number of objects as movable, and the latter, on the contrary, as immovable. This has led to a massive problem of disputes over the qualification of property as movable or immovable for tax purposes”.

The expert said that in addition to the “connection with the ground”, the tax authorities insist that the rules for recognising an object as part of real estate – the so-called norms on indivisible things, complex things and unified real estate complexes – should be taken into account. “They assume that if some property is a part of a technological process, which also includes buildings and constructions or other property associated with land, it should be regarded as a part thereof and be taxed regardless of whether it has any connection with the land itself or not,” explained Nikita Deynega. Under this rule, pipelines, heating systems, power lines, cable lines, transformer substations, etc. are now considered immovable property.

Analyzing court practice on the issue, Nikita noted that “so far, disputes continue and they are resolved both in favour of the tax authorities and taxpayers. But it should be noted that recently, since mid-2021, there has been a trend towards an increase in cases won by taxpayers, following recent rulings by the Supreme Court of the Russian Federation”.

According to the specialist, business losses when property is misclassified amount to tens or even hundreds of billions of roubles. “Each taxpayer, in addition to property tax (2.2% per annum rate) on all properties that the tax authority qualifies as real estate, is assessed additional penalties at the rate of 1/150 of the Central Bank refinancing rate starting from the 31st day of delay (before that – 1/300). In addition, a fine of between 20% and 40% of the amount of arrears is levied,” explained Nikita Deynega.

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