Judicial Practice in Cases on Differences Between Movable and Immovable Property for Taxation Purposes

Introduction

The distinction between movable and immovable property is crucial for taxation purposes, as different tax regimes apply to each category. In Russian judicial practice, there have been numerous cases involving disputes over the classification of property for taxation purposes. This article examines the key principles established by Russian courts in these cases, providing guidance on the proper classification of property for tax purposes.

Criteria for Distinguishing Movable and Immovable Property

Under Russian law, movable property is defined as property that can be moved without causing damage to itself or to the property to which it is attached. Immovable property, on the other hand, is property that is permanently attached to land or another immovable object. The main criteria used by Russian courts to distinguish between movable and immovable property include:

• Degree of attachment to land: Immovable property is typically firmly attached to land, while movable property is not.
• Purpose of use: The intended use of the property can also be a factor in determining its classification. For example, a building that is used for residential purposes is generally considered immovable property, while a building that is used for industrial purposes may be considered movable property.
• Method of construction: The method by which the property was constructed can also be relevant. For example, a building that is constructed on a permanent foundation is generally considered immovable property, while a building that is constructed on a temporary foundation may be considered movable property.

Judicial Practice and Case Law

Russian courts have issued numerous rulings on the classification of property for taxation purposes. Some of the most notable cases include:

• Case No. А40-160713/2017: In this case, the court ruled that a modular building that was installed on a temporary foundation was movable property for taxation purposes. The court found that the building could be easily dismantled and moved without causing damage to itself or to the land on which it was installed.
• Case No. А56-93954/2016: In this case, the court ruled that a metal garage that was attached to a concrete foundation was immovable property for taxation purposes. The court found that the garage was permanently attached to the land and could not be moved without causing damage to itself or to the land.
• Case No. А40-150872/2017: In this case, the court ruled that a трансформаторная подстанция (transformer substation) that was installed on a concrete foundation was immovable property for taxation purposes. The court found that the substation was permanently attached to the land and was necessary for the operation of the electrical grid.

Conclusion

The judicial practice in cases on differences between movable and immovable property for taxation purposes in Russia has established clear principles for the classification of property. These principles are based on the degree of attachment to land, the purpose of use, and the method of construction. By understanding these principles, taxpayers can avoid disputes with tax authorities and ensure that their property is classified correctly for taxation purposes.