Thin Capitalization Case Resolved

The Presidium of the Supreme Commercial Court has resolved the long-awaited ‘thin capitalization case’ in favour of tax authorities and obliged JSC Severniy Kuzbass to pay $5 million in tax, interest and penalty. The court has overruled the decisions of three lower courts who all decided in favour of the taxpayer.

We anticipated this outcome and wrote about the case here and here .

Yesterday’s ruling not only deals a blow to tax minimisation through foreign companies but puts into question something that, until yesterday, few dared doubt: the superiority of tax treaties over domestic law.