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On February 25, 2014 Ruling of the Supreme Arbitrazh Court concerning the case of LLC “IKEA Mos” which clarified earlier case law on tax implications of future asset lease was published.

DATE: March 14, 2014 | AUTHOR: atlawyers

The dispute began in June, 2010, when tax authorities imposed additional taxes and fines in the amount of 1.06 billion rubles on LLC “IKEA Mos”, related to fixtures created by tenants of premises in trade centers owned by IKEA. These premises were leased out on “shell and core” basis before trade centers were completed and commissioned, and tenants made finishing and added fixtures on their own costs. Tax authorities  deemed the value finishing and fixtures  provided by  tenants as taxable income of LLC “IKEA Mos”. The tenants’ works also added the value of the shopping mall, which was not considered by the company and resulted in understatement of estate tax base in the tax authorities’ opinion.

Despite lower courts upheld the decision of tax authorities, the Supreme Arbitrazh Court cancelled overruled rulings and referred to approach provided in the   ruling of Supreme Arbitrazh Court on the future thing lease issues. The court also stated that tax rules which are to be applied to the fixtures created during regular lease agreement shall be applicable to the lease of the “future assets”. In accordance with pp.32 of p.1 of art.251 of the RF Tax code capital contributions in form of permanent improvements performed by tenants shall not be considered as a part of the landlord’s income.

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