The Ministry of Finance issued Guidance Letter No.03-08-13/62064 dated 03.08.2021 providing for clarifications with respect to withholding tax on interest paid by Russian PE of a foreign company under a loan agreement with a foreign lender.
At present, no withholding tax is due on interest paid by Russian PE of a foreign company since as per art. 309-1-3 of the Russian Tax Code only interest paid to foreign companies under debt obligations of Russian legal entities shall be regarded as income from Russian source assessed to withholding tax.
However, with the entry into force of the amendments to the said article of the Tax Code as from January 01, 2022 interest income paid by Russian PE of a foreign company will be treated as Russian-source income provided the related debt obligation is connected with the activities of this PE in Russia and subject to withholding tax at 20% domestic rate, unless reduced under an applicable double tax treaty.
NAZALI TAX & LEGAL