Calculating share of Russian immovable property for corporate income tax purposes

В конце 2019 года Федеральная налоговая служба (ФНС) выпустила разъяснения по расчету доли российского недвижимого имущества при косвенной продаже такого имущества для целей корпоративного подоходного налога.

В настоящей статье рассматривается понятие косвенной (непрямой) продажи недвижимости, а также налогообложение таких операций, причем особое внимание уделяется разъяснению ФНС от 20.11.2019, в котором изложена процедура исчисления налога на недвижимое имущество. Уже созданы прецеденты для подачи исков о неуплате корпоративного подоходного налога с российских лиц, или продавцов акций иностранных компаний, владеющих российской недвижимостью, или российских подразделений крупных международных холдингов, которые ранее продавали российское недвижимое имущество аналогичным образом, в рамках своей группы компаний чтобы оптимизировать свою структуру в России.

At the end of 2019, the Federal Tax Service (FTS) issued clarifications on calculating the share of Russian immovable property in the indirect sale of such property for corporate income tax purposes.

Indirect sale of immovable property

The indirect sale of immovable property is commonly referred to as a situation in which shares owned by a company whose main asset is an immovable property are sold. If the resale of immovable property is planned in the future, many property owners initially register ownership with a separate company (often a foreign one) and sell the shares of such company to a buyer (as a rule, 100% of the company’s shares make up its authorised capital).

Further, if the shares of a foreign company are sold outside the country in which the property is located, no tax is paid on the sale in that country. In Russia, such schemes for selling commercial immovable property are popular as they do not involve the re-registration of property rights in the state register (this procedure is more complicated and lengthier than the re-registration of rights to shares of the company owner). In addition, under Russian rules, the exploitation of certain types of commercial immovable property may require licences or permits, which are also issued within a certain period and may not be available to the acquirer.

As a rule, the place of incorporation of the operating company owners of immovable property is either classic offshore or low-tax jurisdictions with which Russia has concluded a double tax avoidance agreement (DTAA).

For obvious reasons, the tax authorities of most states where such immovable property is located and exploited are dissatisfied with this situation and have introduced restrictions to their tax legislation or concluded international tax treaties that allow levying income tax on such transactions. Russia is no exception in this regard.

Tax on immovable property

According to Article 309 of the Tax Code, income from the sale of shares (equities) of organisations with 50% of assets in directly or indirectly immovable property located in Russia is taxed at the source of income in Russia. In addition, similar rules are included in the DTAAs that Russia has concluded with a large number of foreign states (eg, Australia, Austria, Belgium, the United Kingdom, Israel, Spain, Canada, Cyprus, China, Luxembourg, Malta, the Netherlands, France, Switzerland and Japan). The DTAAs concluded with some states (eg, Japan) make it possible in Russia to tax dividend payments from a Russian subsidiary in favour of a Japanese parent company if the Russian subsidiary’s assets comprise of more than 50% Russian immovable property.

Moreover, following Article 309 of the Tax Code’s introduction, many taxpayers faced uncertainty regarding the calculation of the 50% share of Russian immovable property in the company owner’s assets (the procedure for calculating such a share may be partially specified in some DTAAs or additional protocols thereto, but is undefined in most DTAAs and Russian legislation).


For this purpose, the FTS issued a letter dated 20 November 2019 (SD-4 3/23559), which outlined the following procedure for calculating tax on immovable property.

First, if certain types of asset are recognised as immovable property under Russian law (in particular, aircraft, river and sea vessels), they are excluded from the calculation of the share of Russian immovable property provided that they are not classified as immovable property in the relevant DTAA. If the DTAA does not regulate this issue or no such agreement has been concluded with the relevant jurisdiction, the Russian rules are used and such assets are included in the calculation of the share of Russian immovable property for corporate income tax purposes.

Second, immovable property values for tax purposes are determined on the basis of the latest:

Russian financial statements for organisations; or
financial statements for foreign organisations that own Russian immovable property.
Moreover, foreign financial statements regarding immovable property are converted into Russian rubles using the exchange rate on the date that the financial statements were issued.

If the indicators necessary for calculating the share of Russian immovable property are not directly available in the abovementioned financial statements, the FTS invites tax agents to ask the relevant organisations for said information in order to calculate the taxable share of immovable property.

The FTS also drew attention to the fact that under Russian law, assets under construction fall within the scope of immovable property and the value of investments in construction in progress is included when calculating taxation.

In addition, the FTS’s letter of 20 November 2019 provided an example of how to calculate the share of Russian immovable property in the indirect sale of immovable property for corporate income tax purposes.

The FTS’s clarifications are especially relevant as the Russian tax authorities’ powers have grown following the signing and ratification of a number of international agreements on the exchange of tax information in recent years. This has led to the emergence of effective tools for tracking foreign transactions for the sale of foreign companies that directly or indirectly own Russian immovable property.


The precedents have already been set for filing claims for the non-payment of corporate income tax against Russian individuals or sellers of shares of foreign companies that own Russian immovable property or Russian divisions of large international holdings that previously sold Russian immovable property in a similar way within their group of companies to optimise their structure in Russia.

Автор: Valery Narezhniy


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