The Judicial Panel for Economic Disputes of the Supreme Court has published the full text of its ruling in the case of the limited liability company Yumaks on the payment of tax on a cadastral value that had been increased retrospectively. On 17 July the Supreme Court held invalid all the decisions of the lower courts on Yumaks's claim that had been given in favour of the tax authorities.
In the reasoning of the ruling the Supreme Court explains that a retrospective increase in the tax is nevertheless possible if the valuation has been found unreliable.
Yumaks is in dispute with the Federal Tax Service Department for Moscow and one of its inspectorates. In 2017 Yumaks was issued an additional tax assessment of RUB 10 million and ordered to pay a penalty of RUB 2 million, because the company had paid the property tax on the basis of the "old" valuation of a building of 3.3 thousand square metres at 15 Ilyinka.
The Moscow Government raised the cadastral value of this building from RUB 58 million to RUB 863 million, issuing the relevant resolution on 26 December 2016. The resolution set the new valuation from 1 January of that year. The lower courts took the view that, because in January, at the time Yumaks filed its return, the cadastral value had been entered in the Unified State Register of Real Estate (EGRN), the tax had to be paid on that value. The Supreme Court, however, pointed out that in the autumn of 2018 the Moscow City Court had held the increase in the cadastral valuation from 1 January 2016 invalid.
The court did not side with Yumaks. The ruling states that the value of the building for 2016 must be recalculated again. The court relies on the fact that in February 2016 the commission for the consideration of disputes at the Rosreestr Department for Moscow found the valuation of the building on Ilyinka unreliable, so that valuation could not be used as the tax base. And after the Moscow City Court decision in the autumn of 2018 the new value cannot be applied either, so the amount of the tax must be determined afresh by calculation, the Supreme Court explained.
The managing partner of Consul Group disagrees with this ruling of the Supreme Court, pointing out that a commission at Rosreestr has no authority to declare a resolution of the Moscow Government unlawful or otherwise to limit its effect. The value for 2015-2016 is therefore "still both lawful and in force".
In the ruling the Supreme Court states that Yumaks "could not have failed to know" that the original valuation was patently incorrect. But the value was set by a state cadastral valuation in 2014. Yumaks did not take part in that process and first came onto the list of assets on which tax is paid on cadastral value in 2016.
The court, while holding unlawful the revision of the tax base for the tax for 2016 that was carried out in that year, proposes that it be revised once more. That legal position is inconsistent,
- Sergei Pivovarchik considers.
Consul Group, Pivovarchik says, is preparing a supervisory appeal to the Presidium of the Supreme Court. Later, when the case is heard again at first instance, the lawyers will insist that it is not permissible to revise the tax base "retrospectively".
Together with the increase in the value of the building on Ilyinka, the Moscow Government increased the value of a further 2.5 thousand commercial properties for which cadastral value is the tax base. Together with the change in the valuation, owners of commercial property were issued additional tax assessments of about RUB 12.5 billion, as calculated at Consul Group. More than 50 similar cases were left "hanging" in the courts, awaiting the Supreme Court's decision in the Yumaks case.
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