The court ordered Yandex to pay an additional 1.67 billion rubles in taxes

The Yandex company lost a tax dispute with the Federal Tax Service related to the demolition of the Korston Hotel on Vorobyovy Gory, Forbes reports. The court decided that Yandex cannot reduce its income tax by writing off the costs of liquidating the building, instead of which the construction of a new headquarters is planned. The court held that demolition costs should be included in the cost of the new building.

Image source: Yandex/WikiFido, CC BY-SA 4.0

The story began in 2018, when Yandex acquired the land under the former hotel for $145 million. It was planned to spend another $275–330 million on the construction of a new office, and the project was expected to be completed in 2024. In November 2022, the company filed an updated income tax return for 2021, reducing the tax by 1.67 billion rubles and increasing the amount of expenses by 8.36 billion rubles.

«Yandex justified this by taking into account the costs of demolition of Korston as non-operating expenses, referring to the article of the Tax Code, which allows the costs of liquidation of fixed assets decommissioned to be classified as non-operating expenses. However, the Federal Tax Service (FTS) did not agree with this interpretation.

According to the Federal Tax Service, “the only purpose of liquidating the fixed assets of the hotel complex was to free up the land plot for the subsequent construction of a new office building on it.” The IRS determined that demolition costs should be included in the initial cost of the new headquarters rather than written off through depreciation.

Forbes also reports that in 2023 the company reduced its office space in Moscow by 12,000 square meters, which indicates a possible optimization of business processes. In 2022, Yandex moved from the Amalthea business center to Skolkovo, and some of the offices in the Aurora business center were transferred to the Zen service, which was later sold to VK. The new office on Vorobyovy Gory will occupy about 162,000 square meters, and the company plans to complete the move by mid-2025.