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Business Duty Officer

The Supreme Court protected the investor's right to a tax break

The Supreme Court protected the investor's right to a tax break

Severstal has built a metal products plant in the Saratov region. As an investor, the company expected a five-year profit tax break. And thei included it in the declaration, начиная с момента запуска предприятия. But the tax office decided, that the term should be considered from the moment of capital investment, that is, from the beginning of the construction of the plant. Three instances agreed to this. The Supreme Court came to a different conclusion and did not even return the case for reconsideration.

The Tax Office considered, that the rate could be applied for five tax periods from 2010 y, meaning, from the moment of capital investment. And then the benefit ended in 2015 year. Severstal did not agree with this and challenged the decision of the tax authority.

Three courts usupported the inspection's conclusions, specifying, that capital investments should be understood as costs, that are reflected in accounting. They also noted, that the construction itself already gives a positive economic effect: creates jobs, gives profit to financial organizations, to sellers of goods and services.

However, the judicial board of the Supreme Court for economic disputes indicated, that by law, the benefit is intended to encourage investment. It's available to new investor-organizations. For this reason, the rule on a reduced tax rate should really exempt investors from part of the income tax, which will be derived from the use of new objects.

The Board noted, that according to the current accounting rules, only objects commissioned are considered to be completed construction. And in this case, it's the completed capital investments that are related to the reduced tax rate, not construction costs. The Court noted, that a different approach is "substantially contrary to the legitimate purpose of granting the benefit and violates the principle of equality of taxpayers". In this case, the investor finds himself in a wounded position, because they lose the possibility of full use of the benefit, what is unacceptable.

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