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Common sense or formal approach to resolution of a dispute?

The Supreme Court of Russian Federation has accepted appeal in cassation of legal entity against decision of Federal Tax Authority, on the ground of which the legal entity was requested to pay additional property tax for the period when the property had been already liquidated.

Andrey Toryannikov, Head of Litigation department of PARADIGMA Law Firm, considers this Resolution of the Supreme Court of Russian Federation being revolutionary as it has supported the taxpayer and simultaneously stressed the apparent: the right for a property cannot exist without the property. “As rights and obligationsare inextricably linked, the demand for payment of a property tax for a period, when the object of taxation had been already non-existent, is illegal” – stated the expert.

In addition, Andrey Toryannikov noted in his comment to the Resolution that the Ministry of Finance of Russian Federation (MinFin) several times clarified issue of calculation of property tax in respect of liquidated real estate. Moreover, tax authorities had no problems in application of this issue so far. As an example expert referred to legal opinion of Federal Tax Service expressed in an official letter, in particular Letter of Federal Tax Service dated 08/07/2016 No.БС-4-11/12327@, which explains the procedure of property tax calculation with the references to the provisions of Civil and Tax Codes of Russian Federation.

“While enumerating the grounds for termination of ownership rights for a property (i.e. abandonment of property by its owner, loss or destruction of property and loss of property rights in other cases) tax authorities has indicated the following. When calculating property tax for legal entities in case of liquidation of the real estate a tax authority should calculate the tax only until the date of registration of termination of ownership rights for the real estate. The current practice of arbitrazh courts of appeal instance (including Moscow arbitrazh district) demonstrates that the position of taxpayer has never been taken into account by the courts. All the judiciary acts are practically similar and rendered on basis of identical legal grounds” –stressed the expert.

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