Claiming the application of legitimate tax base instead of what is the most profitable for tax authorities

Background

The tax authority suggested the client should pay taxes on its corporate property (premises within the building) based on cadastral value of the building specified in the Unified State Register of Rights to Immovable Property and Transactions (USRRIPT), by calculating taxes with reference to cadastral value of each particular area in proportion to the total area of the building (according to article 378.2 (§ 6) of the RF Tax Code). However the statutory cadastral value of the building was much higher than the aggregate cadastral value of the premises as shown in the State Real Estate Cadastre (SREC).

The Case

CG specialists discovered that commercial areas within the building were arranged after the commencement date of the state cadastral evaluation and their cadastral values consequently were not fixed by statutory act of CAD. Instead, their cadastral values were calculated and fixed at some point of time after the completion of state cadastral evaluation pursuant to Order No. 113 of the RF Ministry of Economic Development dated 18.03.2011. Based on these facts, we took the position that the taxation base to be used is the cadastral value of the premises specified in SREC as formally approved.

As a result, the tax authority agreed with our arguments and revoked its claims at pre-action stage. 

Why is it of importance?

Due to the nature of the state cadastral evaluation, many companies become subject to overestimated taxation. The tactics and settlement methods selected by CG enhance application of article 378.2 (§ 6) of the RF Tax Code for the benefit of taxpayers and provide an expedient and efficient way to resolve similar issues.