Where the line lies between movable and immovable property

The Supreme Court has once again supported a taxpayer in a dispute with the tax authorities over whether property is to be classified as immovable for the purposes of taxation.

The Mikhailovsky cement plant of Sebryakovcement, a joint-stock company, took the view that the assets it owns (rotary kilns) are movable property and are therefore not subject to property tax. The tax authority and the courts, by contrast, held that this property is immovable and is subject to the tax.

The Supreme Court did not support the tax authorities. Neither the fact that the property is used for a common purpose, nor the combining of the taxpayer's property into a property complex for the purpose of transactions with it (a sale, a pledge and the like), is a sufficient ground for classifying every thing included in that complex as immovable property. How the assets are recognised in the accounting records must be taken into account.

Since 2019 the Supreme Court has been hearing disputes on what must be recognised as immovable property. This time the Supreme Court quite rightly noted that taxpayers should not, in every case, have to commission expert examinations and studies in order to understand whether or not the property is subject to tax. Taxpayers need formalised, intelligible criteria. Those criteria are laid down above all in the accounting rules, and the tax authorities are no longer entitled to ignore them. The series of court disputes on this question continues, however. On 18 December 2024 the Supreme Court will hear a similar dispute involving TEKSKOR, a joint-stock company (case No. А12-12954/2023), comments Andrey Rymarev, head of tax practice at Consul Group.

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