On 1 January 2021 a number of tax law amendments introduced by Federal Law 374-FZ of 23 November 2020 entered into force. Among these amendments was the introduction of a rule concerning the taxation of transactions involving the transfer and acquisition of property rights to the Tax Code. Now, the law directly states that property rights, along with other property, are exempt from taxation. At present, according to Article 251(1)(11) of the Tax Code, where one company directly or indirectly participates in the charter capital of the other and the participating interest is at least 50%, a property rights transfer between the companies is exempt from corporate income tax.


The introduction of this rule to the Tax Code has put an end to numerous disputes between the tax authorities and taxpayers with respect to transfers of property rights (usually the exclusive rights to the results of intellectual activity) between a parent and its subsidiaries. Previously, upon detecting such a transfer without charge, the tax authorities denied the right to the tax exemption provided for in Article 251(1)(11) of the Tax Code on the grounds that:

  • property rights were not explicitly named in the Tax Code; and
  • according to civil law, property rights are an independent object of civil rights, different from property, which would render it unlawful to extend to them the tax benefit established for property transfers.

In general, this approach was supported by judicial practice (eg, the 2 August 2007 decision of the Federal Anti-monopoly Service of the Central District in Case A08-4907/06-25 and the decisions of the Rostov Region Arbitration Court and the 15th Arbitration Court of Appeal in Case A53-25/2020).

The problem of such a gratuitous transfer being subject to taxation was especially relevant for groups of companies with a research and development unit whose intellectual activity had protectable results which were subject to being transferred to the parent for subsequent implementation and use where such group was separated into an independent legal entity. Previously, companies had to transfer property rights on a reimbursable basis at market prices or take risks to transfer them free of charge under the threat of receiving claims for the payment of corporate income tax from tax authorities under Article 250(8) of the Tax Code. Now, since Article 251(1)(11) of the Tax Code has been amended to directly exempt companies from paying corporate income tax when transferring property rights, the above problem should be resolved.

Federal Law 374-FZ has introduced another important innovation. At present, both direct and indirect participation in charter capital is considered when determining the 50% threshold upon which a company becomes eligible for this benefit. By way of an example, Company A transfers property rights to Company B. Company B does not directly own shares in the charter capital of Company A but owns 90% of the shares in the charter capital of Company C, which in turn owns 70% of the shares in the charter capital of Company A. In this case, the indirect interest is equal to 90*70/100=63%, which is more than 50%; accordingly, Company A is entitled to receive the tax benefit.


However, it should be noted that such a tax-free property rights transfer is possible only when it is between a majority parent and subsidiary companies. If property rights are transferred between 'sister companies' (ie, companies whose shares are owned by a third company) or from or to a minority parent, or the direct or indirect interest of the parent is less than 50%, the tax benefit provided for in Article 251(1)(11) of the Tax Code does not apply.

Date of effect

Finally – and this is more good news for taxpayers – the abovementioned amendments to the Tax Code have a retrospective effect, applying to all legal relationships arising from 1 January 2020 onwards.

Originally published by International Law Office.

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