Parizhskaya Kommuna challenged a refusal of tax relief

Parizhskaya Kommuna, a closed joint-stock company, successfully challenged the refusal of Inspectorate No. 5 of the Federal Tax Service for Moscow to apply a reducing coefficient of 0.1 to the rate of property tax for organisations for 2022.

The dispute concerned the premises on the 1st and 2nd floors of the building at Pyatnitskaya Street, 27, building 1.

The property lies in a pedestrian zone of city-wide significance and is on a special list of buildings for which tax relief is provided. By law, the right to apply the reducing coefficient belongs to the right-holders of premises located on the 1st and 2nd floors of such buildings. In this case, however, Parizhskaya Kommuna owned not separate premises but the building as a whole.

The tax authority refused the relief, on the ground that the premises on the 1st and 2nd floors have not been separated out as independent real estate assets. In the inspectorate's view, the relief cannot be applied to parts of a building.

The courts of three instances (first instance, appeal and cassation) held the refusal unlawful:

• the premises meet every condition for the relief;

• the form of ownership, whether of the building as a whole or of separate premises, does not affect the taxpayer's right;

• the inspectorate's position breaches the principles of legality and of equality of taxation.

The courts confirmed an important point of law: tax relief may be applied not only to premises that have the status of an independent asset, but also to parts of buildings, where the prescribed criteria are met.

Once again the courts are explaining the obvious to the tax authorities. The form in which title is registered, to the building as a whole or to separate premises, cannot be a ground for refusing tax relief.

Even so, the tax authorities have gone on ignoring this position for many years. The case is another reminder to taxpayers that inspectorates often make mistakes in applying the legislation. And sometimes it is simpler still: they refuse relief in the knowledge that only a few companies are prepared to defend their rights in court. Sergei Pivovarchik, managing partner of Consul Group, comments.

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