Thin Capitalisation

The coal mining company Severniy Kuzbass has challenged the decision of the tax authorities barring deduction from taxable income of interest on a loan extended by a non-resident (case number A27-7455/2010).

Boris Silin

Muranov, Chernyakov & Partners
+7 495 783-74-50
b.silin@rospravo.ru

The courts of three instances ruled for the company: interest on a loan provided by a non-resident constitutes non-operational expenditures and, therefore, tax deductible because these issues are governed by a double tax treaty between the Russian Federation and the creditor’s country of residence.

Not satisfied with the decision of the courts, the tax collectors applied to the Supreme Commercial Court of Russia.

In a plenary session of three judges on August 12, 2011 the Supreme Commercial Court referred the case to Presidium. The reason why the matter was sent to the Presidium of the Supreme Comm