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Construction Site of A Foreign Organization


"Construction site of a foreign organization" is a term established by the Tax Code for taxation of profits received by a foreign organization through business activity in Russia.

The term includes:

  1. Construction sites of new objects or re-construction and repair of existing objects of immovable property (excluding aircraft and marine and inland water vessels);
  2. Construction sites for assembling, repairing, or reconstructing equipment which requires rigid bracing to a foundation or to structural elements of a building, construction, or a floating structure (i.e. floating drill rig).

In determining the duration of the construction site for tax purposes, all types of activity conducted at this site, such as preparatory, construction, assembly, formation of access and exit routes, utilities, and other infrastructure facilities, must be taken into account.

In cases when a foreign organization as a general contractor commissions some of work to subcontractors, the time used by subcontractors is accounted as time used by the general contractor.

In cases when a subcontractor is a foreign company, its activity at this construction site is also considered as a permanent representation of the subcontractor company.

The starting date for the construction site for tax purposes is the earlier of following dates:

  • Date of signing the agreement to transfer the site to the company as a leaser/contractor;
  • The date of the actual start of activity at the site.

The end date of a construction site is a date the customer signs a certificate of completion (Акт сдачи-приемки) for the object or work prescribed by the agreement. The end date for subcontractor’s activity is the date the certificate of completion is signed by the general contractor. In cases when the certificate of completion is not signed, or when the actual work activity was conducted after signing the certificate, the end date for the construction site is the date of the actual completion of preparatory, construction, or assembly work. 

The construction site does not cease its existence if activity is temporarily suspended, except in cases that it is temporary closed for a period exceeding 90 days by a decision of the state authorities or as a result of force majeure circumstances.

Continuing or resuming activity at the construction site after the suspension of activity after signing a certificate of completion will result be considered a resumption of activity and the term of suspension will be added to the total duration of the existence of the construction site only in cases when:

  1. the location of the resumed activity is the same as the location of the previously suspended activity or is adjoined to it;
  2. the continued or resumed activity is commissioned to the entity which previously worked at this site, or when previous and new subcontractors are interdependent entities.

If continuing or resuming activity is related to construction or assembly of a new object at the same construction site, or due to the expansion of a previously completed project, the term between this activity and period of inactivity is also added to the duration of the construction site's existence. In all other cases, including repair or reconstruction of a previously completed project, the duration of continued or resumed activity and duration of the interval between them are not added to the duration of the construction site's existence.

Construction or assembly of such objects that require change of geographic location in the process, i.e. road construction, is viewed as activity at one constructions site.

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