Russian subsidiaries of multinational companies are extremely warried by recurrent refusals by the tax authorities to acknowledge the deductibility of interest paid under intercompany loans. The tax inspectorates automatically perceive the payment of interest under the loans received from the foreign companies within the same group as a method of aggressive tax optimization and intentional withdrawal of profit from taxation in Russia without analyzing the background and the specifics of each particular case. It is even more upsetting that Russian courts support the said approach.
The representatives of the business community believe that when assessing whether the loans are justified or not, one must proceed on a case by case basis and acting from the following position: if alternative solutions would lead to similar financial results, then debt financing should not be considered unjustified. Business associations contacted the Federal Tax Service and expressed the hope that the service would issue official clarifications on taxation of cross-border loans with a formulation of "clear and unambiguous criteria" when such loans should be deemed economically justified and, thus, permit the deductibility of interest for profit tax purpose.
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NAZALI TAX & LEGAL |