Friday, 12 June 2015

Fine tuning of Russian thin capitalization rules

The draft federal law introducing amendments to the thin capitalization rules in Russia has passed the first reading in the Russian Parliament's lower chamber.  This document is in the early stages of the legislative process; it has two more readings to pass.  Then it should be approved by Parliament's upper chamber and by Russia's President. The draft law likely will be enacted; legislators have tried to correct the thin capitalization rules several times. This time their attempt should be realized.
The draft law clarifies the provisions of Article 269 of the Tax Code which, in particular, regulates the deductibility of loan interest in accordance with thin capitalization rules.  The draft law would:

  • revise the list of loans which may be subject to control under the thin capitalization rules. In particular, it will include loans from foreign sister companies
  • exclude loans from independent banks guaranteed by related parties from the scope of the thin capitalization rules under certain conditions
  • clarify the method of calculation of non-deductible interest reclassified into dividends for tax purposes.

This draft law is expected to be effective on January 1, 2016.
Source & more info: PwC