What is a temporary structure? Temporary buildings and structures (T&S) are necessary to provide for production needs and services to construction workers. Tax consequences depend on the type of temporary buildings and structures.

The current standard[1] stipulates the following types of temporary buildings and structures:

1. By purpose:

• Title (basic) - designed to meet the needs of construction. Accounted for on the Customer's balance sheet.
  
• Non-title (auxiliary) - intend to organize work at construction site. Recorded on the balance sheet of the contractor. 
• Other temporary facilities and special auxiliary structures and devices. 

2. According to the period of operation: 

• Inventory (depreciable) - for multiple use.
  
• Non-inventory - for single use, their use after the end of operation and dismantling is impossible. 

What are the tax consequences?

The main disputes with the tax authority, as a rule, arise when disputing the costs of creation (transfer) of intangible assets. Let's dwell on the peculiarities of taxation of intangible assets in detail:

Income tax

Title VZiS. The costs of work on the construction of TPLs can be attributed to direct costs and to indirect costs. The taxpayer independently determines the list of direct and indirect costs in the accounting policy for tax purposes.

Practice. In one of the cases[2] the tax authority disputed the inclusion of expenses by the taxpayer as indirect expenses. The Inspectorate believed that the cost of the taxpayer-construction company to provide temporary electricity supply, the construction of temporary roads belong to the direct costs associated with the creation of fixed assets and must be included in the initial cost of future objects. 

The court supported the position of the tax authority and noted that all costs of the taxpayer are an integral part of the cost of construction of facilities and should be included in their formed initial cost as direct costs. As a result, the construction company (contractor) has been assessed additional 14 million rubles.

Non-intrinsic VZiS. The costs of creating non-inventory non-title VZIS are included in the material costs in the full amount at the moment of putting such objects into exploitation. 

Depreciation of intangible assets. Inventory VZIS are written off to expenses in the tax accounting by accrual of depreciation. 

The costs of dismantling and the residual value of inventory VZIS are accounted for as non-operating expenses. The cost of property received in the course of dismantling of these facilities is accounted for as non-sale income.

VAT

Title VZiS. The provision of services by the customer to the contractor for the use of temporary title buildings and structures is subject to VAT. 

Non-title VZiS. The performance of the construction-assembly works by the contractor for its own needs on the netitular building and construction works similarly forms the object of VAT taxation.

Practice. In one of the cases[3] the Inspectorate assessed the general contractor additional VAT on the grounds that he transferred the net environmental protection equipment, but did not issue invoices to the contractors for the services rendered. 

The court sided with the tax authority, since the taxpayer took into account the incoming VAT when receiving non-title VZiS from the customer. 

Property tax

The property tax is payable if the inventory object belongs to immovable property in accordance with the civil legislation. 

In this case, the taxpayer from the object of titular TPS is the customer, non-titular TPS - the contractor.

As can be seen from the reviewed examples taxation of TZIS depends on the specific object used by the taxpayer in the organization of construction. Special attention is paid by the tax authorities to the description of the EEO in construction documents and the content of agreements with the contractor.

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[1] Order of the Ministry of Construction of Russia N 332/pr of 19.06.2020

[2] Determination of the Supreme Court of the Russian Federation N 305-KG17-13063 of 27.09.2017

[3] Decision of the Arbitration Court of the Far Eastern District N F03-1508/2018 from 16.05.2018