The landlord’s transition to the simplified tax system does not reduce the rent – Kommersant

The Supreme Court of the Russian Federation spoke negatively on the question of whether it is possible to reduce the rent by the amount of VAT if the lessor switched to the simplified taxation system (STS). This position was expressed by the Supreme Court within the framework of the dispute between JSC Autonomous Heat and Power Company (ATK), which leases a number of facilities from the MUP Maikop Heat Networks “for the purpose of production, transportation and sale of thermal energy to consumers.” The contract contained a condition that the amount of rent could be changed by mutual agreement of the parties, but only upward.

Initially, the municipal unitary enterprise applied a general taxation system, issued VAT invoices to the tenant, and the tenant had the right to claim this amount of tax as a deduction. But since 2018, the company switched to the simplified tax system, after which ATK asked to reduce the rental price by the amount of VAT. The municipal unitary enterprise refused, noting that it was not obliged to reduce the fee, but the tenant, on his own initiative, began to pay less for the rental of objects by the amount of VAT. In December 2020, MUP demanded pay the difference and, having received no response, went to court.

The arbitration courts rejected the enterprise. According to the courts, since the lessor is no longer a VAT payer, he does not have the right to recover the amount of this tax as part of the rent. Lawyers interviewed by Kommersant explained that, in fact, when applying the simplified tax system for the landlord, this 20% VAT becomes additional income, while for the tenant the rental price increases by the same amount.

The municipal unitary enterprise appealed these decisions to the Supreme Court and succeeded in transferring the case to the economic board, which supported its arguments. According to the Supreme Court, a change in the tax conditions of one of the parties to the transaction “has only public law consequences”, “does not entail a revision of the conditions” and “cannot in itself serve as a basis for changing the price of the contract.” “The tenant is obliged to pay the price established by the contract, regardless of how the lessor should use the funds received,” the economic board emphasized.

In addition, as noted in the ruling of the highest authority, since the lease agreement was concluded based on the results of mandatory bidding, its terms cannot be arbitrarily revised by the parties. Moreover, the contract itself directly states the possibility of changing the price “only in the direction of its increase.” By insisting on reducing the rent, the tenant “essentially demands to reconsider the results of the competition in terms of the price conditions,” which is unacceptable either under the terms of the contract or by force of law, the Supreme Court concluded.

Anna Zanina