The Russian Supreme Court again explained what to consider movable and immovable for taxation purposes. Sergey Ivanov commented on the judicial trend for Kommersant.

The decision, which is important for business, was handed down as part of OGK-2's dispute with the tax authority. In 2015, the organization began operating a new combined cycle power unit, attributing the objects included in it to movable property, which are entitled to benefits. But the tax authorities, when checking the declarations for 2018, considered that 491 objects out of 1,701 constituted a single complex thing and were real estate. According to the inspectorate, the benefits do not apply to gas and steam turbines, transformers, waste heat recovery boilers, drainage tanks and others. This led to additional taxation.

The company challenged the tax claims. Arbitration courts supported the inspectorate, pointing out that the disputed objects «are structurally and technologically interrelated» and that their dismantling and assembly at a new location «would entail substantial damage to the integrity of all structures». The company filed a complaint with the Supreme Court of the Russian Federation, insisting that the disputed objects do not meet the characteristics of real estate, as they «belong to machinery and equipment, have different useful lives» and are not intended for the operation of buildings. The case was referred to the Economic Collegium, which eventually sided with the business. 

Sergey Ivanov, Senior Tax Consultant at Tax Compliance, notes the continuation of the positive trend in 2024. The Supreme Court of the Russian Federation, as in the case of Texcor JSC, drew attention to the fact that the objects were recorded as movable and had different useful lives. It was also pointed out that the fact that property is used for a common purpose predetermined by production technology and that the taxpayer's property is combined into a property complex for the purposes of transactions with it (sale and purchase, pledge, etc.) are not sufficient grounds for qualifying all items included in such a complex as objects of taxation under the corporate property tax.

Thus, the tax authority, according to the case materials, does not refute the lawfulness of accounting for the disputed objects as independent inventory items of fixed assets and does not prove the existence of grounds for accounting for the disputed objects as part of buildings and structures as real estate.

In the opinion of the TC expert, the emerging trend of practice reversal on the topic of reclassification of movable property opens up new opportunities for taxpayers. In light of the changing approach, many companies are taking actions to change their property tax policy: they are requesting tax audits from tax consultants to identify «controversial» objects and tax reserves, obtaining expert opinions to assess whether the property meets all the criteria developed by the practice, and ordering complex solutions to support the implementation of these new opportunities. In other words, companies are gathering evidence base to try to defend their own approach to property qualification on favorable ground.

The Tax Compliance team continues to follow the development of court practice and supports businesses in such disputes.