The Federal Tax Service of Russia has published letter No. BS-4-21/7894@ dated 11.07.2024 «Overview of legal positions of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation on certain issues of application of Article 378.2 of the Tax Code of the Russian Federation». Alexey Stanchin, Head of Tax Compliance Practice, commented on the main conclusions for EZh-Jurist. 

This Letter is addressed to tax authorities' employees for further application in their work and includes an analysis of six court decisions on the issues of taxation of real estate objects based on their cadastral value. 

Summarizing the positions of the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation, the following conclusions can be drawn:

1. If the building will house offices, which the taxpayer uses for its own activities and does not lease to third parties, such a building will still comply with subparagraph 2, paragraph 1, Article 378.2 of the Tax Code of the RF and the tax base will be determined as the cadastral value of the property. This conclusion of the RF Supreme Court is due to the fact that by placing its employees in a building and making an office exclusively for them, the taxpayer still receives a commercial benefit;

2. Based on the court's position, when interpreting subpar. 4 p.1 of Article 378.2 of the Tax Code of the Russian Federation, taxpayers should «divide» this provision into two components. Thus, the tax base is determined on the basis of the cadastral value for: a) residential buildings, garden houses, outbuildings or structures, which are located on land plots provided for personal subsidiary farming, horticulture, gardening or individual housing construction, and b) residential premises, garages, parking spaces, construction in progress;

3. A shopping center shall be understood as a freestanding non-residential building (structure, construction) located on a land plot, one of the types of permitted use of which provides for the placement of retail facilities, public catering facilities and (or) consumer services;

4. The Constitutional Court of the Russian Federation pointed out that subparagraph 1 para. 4 of Article 378.2 of the Tax Code does not provide for the possibility of determining the tax base for corporate property tax on the basis of the cadastral value of a building solely due to the fact that one of the types of permitted use of the land plot leased by the taxpayer, on which the immovable property owned by him is located, provides for the location of retail facilities, public catering facilities and (or) consumer services, regardless of the purpose and actual use of the building. 

At the same time, the Constitutional Court of the Russian Federation pointed out that there is currently a possibility of reviewing judicial acts in cases of those taxpayers who, prior to the entry into force of the relevant decision, applied to the courts with claims relating to the exclusion of immovable property objects from the Lists of immovable property objects in respect of which the tax base is determined as the cadastral value, but whose claims in relation to the relevant tax periods were not satisfied due to the application of the challenged provision in an interpretation that is at variance with the taxpayer's tax legislation.

An analysis of the Letter shows that in fact the Federal Tax Service has summarized previously existing positions and reminded inspectors of the need to apply the relevant approaches in their work. 

In our opinion, taxpayers will not find any fundamentally new points, but the clarifications of the Constitutional Court and the Supreme Court of the Russian Federation bring clarity to controversial issues of interpretation of Article 378.2 of the Tax Code, which must be followed in their work.