diff --git a/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.kt b/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.kt
index 59e5422611d..86a57e0c766 100644
--- a/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.kt
+++ b/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.kt
@@ -1,13 +1,30 @@
+//!DIAGNOSTICS: -UNUSED_PARAMETER
+
 @Suppress("INVISIBLE_MEMBER", "INVISIBLE_REFERENCE")
 fun <R> Iterable<*>.filterIsInstance1(): List<@kotlin.internal.NoInfer R> = throw Exception()
 
+@Suppress("INVISIBLE_MEMBER", "INVISIBLE_REFERENCE")
+fun <R> List<*>.filterIsInstance2(): @kotlin.internal.NoInfer List<R> = throw Exception()
+
 fun test(list: List<Int>) {
-    list.filterIsInstance1<Int>().map { it * 2}
+    list.filterIsInstance1<Int>().map { it * 2 }
+    list.filterIsInstance2<Int>().filter { it > 10 }
 }
 
 @Suppress("INVISIBLE_MEMBER", "INVISIBLE_REFERENCE")
 fun <R> foo(t: R): List<@kotlin.internal.NoInfer R> = throw Exception("$t")
 
 fun test() {
-    foo(1).map { it * 2}
+    foo(1).map { it * 2 }
+}
+
+@Suppress("INVISIBLE_MEMBER", "INVISIBLE_REFERENCE")
+fun <R> List<R>.foo(): @kotlin.internal.NoInfer R = throw Exception()
+
+@Suppress("INVISIBLE_MEMBER", "INVISIBLE_REFERENCE")
+fun <R> bar(r: R, f: Function1<@kotlin.internal.NoInfer R, Unit>): Nothing = throw Exception()
+
+fun test1() {
+    listOf("").foo().length
+    bar(1) { x -> x + 1 }
 }
\ No newline at end of file
diff --git a/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.txt b/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.txt
index bb3a67f8a10..b2f3a015d90 100644
--- a/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.txt
+++ b/compiler/testData/diagnostics/testsWithStdLib/inference/annotationsForResolve/internalAnnotationsOnTypes.txt
@@ -1,6 +1,10 @@
 package
 
+@kotlin.Suppress(names = {"INVISIBLE_MEMBER", "INVISIBLE_REFERENCE"}) public fun </*0*/ R> bar(/*0*/ r: R, /*1*/ f: (R) -> kotlin.Unit): kotlin.Nothing
 @kotlin.Suppress(names = {"INVISIBLE_MEMBER", "INVISIBLE_REFERENCE"}) public fun </*0*/ R> foo(/*0*/ t: R): kotlin.List<R>
 public fun test(): kotlin.Unit
 public fun test(/*0*/ list: kotlin.List<kotlin.Int>): kotlin.Unit
+public fun test1(): kotlin.Unit
 @kotlin.Suppress(names = {"INVISIBLE_MEMBER", "INVISIBLE_REFERENCE"}) public fun </*0*/ R> kotlin.Iterable<*>.filterIsInstance1(): kotlin.List<R>
+@kotlin.Suppress(names = {"INVISIBLE_MEMBER", "INVISIBLE_REFERENCE"}) public fun </*0*/ R> kotlin.List<*>.filterIsInstance2(): kotlin.List<R>
+@kotlin.Suppress(names = {"INVISIBLE_MEMBER", "INVISIBLE_REFERENCE"}) public fun </*0*/ R> kotlin.List<R>.foo(): R
diff --git a/core/descriptors/src/org/jetbrains/kotlin/types/TypeSubstitutor.java b/core/descriptors/src/org/jetbrains/kotlin/types/TypeSubstitutor.java
index 8b335b32d51..58ba9d4f0d5 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/types/TypeSubstitutor.java
+++ b/core/descriptors/src/org/jetbrains/kotlin/types/TypeSubstitutor.java
@@ -240,7 +240,7 @@ public class TypeSubstitutor {
                 return containedOrCapturedTypeParameters.contains(key.getConstructor()) ? substitution.get(key) : null;
             }
         };
-        KotlinType substitutedType = KotlinTypeImpl.create(type.getAnnotations(),   // Old annotations. This is questionable
+        KotlinType substitutedType = KotlinTypeImpl.create(substitution.filterAnnotations(type.getAnnotations()),   // Old annotations. This is questionable
                                                            type.getConstructor(),             // The same constructor
                                                            type.isMarkedNullable(),           // Same nullability
                                                            substitutedArguments,
diff --git a/core/descriptors/src/org/jetbrains/kotlin/types/TypeUtils.kt b/core/descriptors/src/org/jetbrains/kotlin/types/TypeUtils.kt
index 58230a5ab53..7f8604524e8 100644
--- a/core/descriptors/src/org/jetbrains/kotlin/types/TypeUtils.kt
+++ b/core/descriptors/src/org/jetbrains/kotlin/types/TypeUtils.kt
@@ -101,7 +101,7 @@ fun TypeProjection.substitute(doSubstitute: (KotlinType) -> KotlinType): TypePro
 }
 
 fun KotlinType.replaceAnnotations(newAnnotations: Annotations): KotlinType {
-    if (newAnnotations.isEmpty()) return this
+    if (annotations.isEmpty() && newAnnotations.isEmpty()) return this
     return object : DelegatingType() {
         override fun getDelegate() = this@replaceAnnotations