What is changing in tax practice: key positions of the Constitutional Court and the Supreme Court of the Russian Federation for Q1 2026

The Federal Tax Service of Russia has circulated to its territorial tax inspectorates a review of the legal positions adopted by the Constitutional Court of the Russian Federation and the Supreme Court of the Russian Federation on tax matters in Q1 2026 “for use in their work”.

Formally, the review does not introduce new rules of law. At the same time, its practical significance is substantial: territorial tax authorities are expected to rely on the approaches set out in the review when conducting tax audits, considering objections to tax audit reports and reviewing administrative appeals.

Accordingly, the positions included by the Federal Tax Service in the review should already be taken into account both by companies currently undergoing tax audits or involved in tax disputes and by taxpayers assessing the risks associated with future transactions.

Particular attention should be paid to the Supreme Court’s conclusions on tax reconstruction and the identification of the actual contractor, the possibility of conducting a repeated field tax audit, as well as the Constitutional Court’s position on the procedural status of a taxpayer under audit.

The review covers seven legal positions of the Constitutional Court and the Supreme Court.

Key Positions and Their Practical Implications

Corporate profit tax reconstruction is possible only where the actual contractor is identified

In its Ruling No. 307-ЭС25-11805 dated 31 March 2026 in case No. А56-83561/2023 (the WorkForce LLC case), the Judicial Panel for Economic Disputes of the Supreme Court of the Russian Federation established an important approach to the reconstruction of corporate profit tax liabilities.

According to the documents in the case, the works were performed by third-party contractors, whereas in practice the company used its own resources and also engaged workers who were not formally employed.

The lower courts proceeded on the basis that the actual performance of the works had been confirmed and permitted the taxpayer’s expenses to be determined on an estimated basis.

The Supreme Court disagreed with that approach. It held that expenses in the form of funds transferred to “technical” counterparties on the basis of unreliable primary accounting documents cannot be recognised by applying an estimated calculation method.

Tax reconstruction is possible only where the actual contractor and the real parameters of performance have been established. At the same time, calculating expenses solely on the basis of the number of workers presumed to have been required to perform the relevant scope of work does not take into account circumstances where labour was engaged without the payment of personal income tax and social insurance contributions, i.e. outside the lawful course of business.

What this means for business

In a tax dispute, evidence that the works were in fact performed may not, by itself, be sufficient. A taxpayer should be prepared to identify the actual contractor, disclose the real parameters of performance and provide documentary evidence supporting the relevant expenses.

Relationships with subcontractors require particular attention. Companies should not limit themselves to formal counterparty checks at the contracting stage, but should also retain documents evidencing who actually performed the obligations and what resources were used.

It may also be advisable to include in subcontracting agreements obligations to disclose information regarding the personnel engaged and to provide evidence that such personnel have been lawfully employed or otherwise engaged.

Participation of regional tax authority officials in the initial audit does not preclude a repeated field tax audit

In its Ruling No. 309-ЭС25-9697 dated 18 March 2026 in case No. А07-18520/2024 (the Neftegazstroy LLC case), the Judicial Panel for Economic Disputes of the Supreme Court of the Russian Federation held that the participation of officials of a higher-level tax authority in an initial field tax audit does not, in itself, prevent that authority from subsequently conducting a repeated field tax audit.

The inclusion of regional tax authority officials in the audit team for coordination and supervision purposes does not mean that the higher-level tax authority has already exercised its powers of repeated tax control.

Accordingly, the prior participation of such officials in the initial audit does not constitute sufficient grounds for declaring a repeated audit unlawful.

Points to consider when preparing a defence

A defence strategy in the context of a repeated field tax audit should not be based solely on the formal argument that regional tax authority officials participated in the initial audit. Instead, it should focus on the specific actions taken by the tax authority.

Potential grounds for challenge may include exceeding the permissible scope of the repeated audit, requesting an unjustifiably broad volume of documents, failure to comply with statutory time limits or procedural deficiencies in the conduct and documentation of tax control measures.

A taxpayer under audit cannot be questioned as a witness in its own tax audit

In its Resolution No. 12-П dated 5 March 2026, the Constitutional Court of the Russian Federation held that Article 90(1) and the first paragraph of Article 128 of the Russian Tax Code do not permit a person who is subject to a tax audit to be summoned and questioned as a witness in relation to the circumstances of that person’s own activities.

Such a person may not be held liable for failure to appear for questioning specifically in the capacity of a witness. Penalties imposed on that basis are subject to cancellation.

At the same time, the tax authority retains the right to summon a taxpayer to provide explanations pursuant to Article 31(1)(4) of the Russian Tax Code.

What matters when dealing with the tax authorities

Upon receiving a summons from the tax authority, it is important first to determine the procedural capacity in which the person is being summoned and the tax control measure in connection with which the summons has been issued.

If the taxpayer under audit is summoned specifically as a witness regarding the circumstances of its own activities, any refusal to participate should be properly documented and reasoned by reference to the taxpayer’s procedural status and the relevant position of the Constitutional Court.

The summons should not simply be ignored without formally stating the taxpayer’s position.

As a general rule, an exchange of real estate between individuals does not give rise to personal income tax

By Resolution No. 1-П dated 15 January 2026, the Constitutional Court of the Russian Federation held Article 214.10(2) of the Russian Tax Code to be inconsistent with the Constitution of the Russian Federation insofar as it allows personal income tax to be assessed automatically by reference to the cadastral value of the transferred property multiplied by a coefficient of 0.7.

Until the Russian Tax Code is amended, an exchange of real estate carried out for purposes unrelated to business activities gives rise to personal income tax only where the tax authority proves that the exchange was not equivalent, namely that there were no reasonable economic grounds for the transaction and that the value of the property received substantially exceeded the value of the property transferred.

Only the corresponding difference in value is subject to taxation.

The Constitutional Court also expressly excluded the possibility of an unrestricted reassessment of tax previously paid for prior tax periods at the initiative of an unlimited class of taxpayers.

Points to consider

When structuring real estate exchange transactions, it is advisable to document in advance the economic rationale for the transaction and the grounds supporting the equivalence of the properties exchanged.

This is particularly relevant for shareholders, beneficial owners and other private owners who enter into transactions involving personally owned real estate outside the course of business activities.

State and municipal institutions are required to pay state duty in commercial disputes

In its Ruling No. 1-О dated 15 January 2026, the Constitutional Court of the Russian Federation confirmed that the exemption provided for in Article 333.37(1)(1.1) of the Russian Tax Code does not apply to state, budget-funded or autonomous institutions in disputes arising from civil-law relationships where such disputes are unrelated to the exercise of public authority or the protection of public interests.

Practical implications

Counterparties of state and municipal institutions should take into account the actual litigation costs of the opposing party when assessing the prospects of litigation, bringing counterclaims and negotiating settlement terms.

The tax treatment of income derived by the head of a peasant farm from the sale of real estate depends on the actual use of the property

In its Ruling No. 47-CAD26-1-К6 dated 11 March 2026 in case No. 2а-8/2024, the Judicial Panel for Administrative Cases of the Supreme Court of the Russian Federation held that the applicable tax treatment of income from the sale of real estate must be determined by reference to the actual characteristics of the property and the circumstances of its use.

Relevant factors include the intended purpose of the property, its nature and consumer characteristics, the purpose for which it was acquired and subsequently sold, as well as its actual use.

A formal reference solely to the seller’s status or the category of the land plot is insufficient to determine the applicable tax consequences.

Practical implications

For entrepreneurs engaged in agricultural activities who also own property used for personal purposes, it is increasingly important to document the distinction between personal and business assets.

Ideally, such distinction should be established at the time the property is acquired, with supporting evidence of its actual use retained thereafter.

Field tax audits of accredited IT companies initiated before 3 march 2025 may remain legally valid

The Supreme Court of the Russian Federation upheld the guidance issued by the Ministry of Finance of the Russian Federation and the Federal Tax Service permitting field tax audits of accredited IT companies subject to approval by the head of the higher-level tax authority or the Federal Tax Service.

For companies in respect of which such audits were initiated before 3 March 2025, reliance solely on the restrictions previously applicable to field tax audits does not constitute an independent basis for declaring the audit unlawful.

Practical implications

This position is primarily retrospective in nature and is relevant to ongoing disputes arising out of audits initiated in earlier periods.

In such cases, the defence should be based on specific procedural violations in the conduct of the audit and on the assessment of evidence collected by the tax authority.

Which positions should be taken into account immediately

The following positions are of the greatest immediate relevance to current tax practice:

• tax reconstruction and the requirement to identify the actual contractor;
  repeated field tax audits;
• the procedural status of a taxpayer under audit;
• personal income tax consequences of real estate exchange transactions.

These positions may already be relied upon in ongoing tax audits, when preparing objections to tax audit reports, administrative appeals and litigation strategies.

The positions concerning state duty payable by state and municipal institutions and the taxation of property owned by heads of peasant farms are more specific in scope and should be assessed in light of the taxpayer’s particular activities and asset structure.

The position concerning audits of accredited IT companies is primarily limited to audits initiated in earlier periods and disputes that remain ongoing.

Practical takeaways for business

The Federal Tax Service review should be regarded not merely as a formal summary of judicial practice, but as an indication of how territorial tax authorities are likely to apply the relevant legal positions in practice.

Particular attention should currently be paid to:

• documentary evidence of the actual performance of obligations by counterparties and subcontractors;
• the ability to identify and substantiate the actual contractor in the event of a tax dispute;
• compliance with the law when personnel are engaged by contractors and subcontractors;
• correct determination of the procedural status of persons summoned by the tax authority;
• analysis of specific procedural violations in repeated field tax audits;
• documentation of the economic rationale and equivalence of real estate exchange transactions.

Companies that are already undergoing a tax audit or are involved in a tax dispute should compare the position taken by the tax inspectorate with the approaches included by the Federal Tax Service in the review. Where a territorial tax authority continues to apply an earlier approach, the relevant position of the Constitutional Court or the Supreme Court may be directly relied upon in objections and administrative appeals.

When working with subcontractors, companies should also review their existing contractual arrangements and consider requiring information on the actual contractors, the manner in which personnel are engaged and the documents evidencing actual performance of the contractual obligations.