Thursday, January 12, 2012

Russian Court: DTTs Do Not Override Thin Cap Rules

The Supreme Arbitrazh (Economic) Court (VAS) published its Presidium (acting as the last-instance economic court) decision resolving the much debated issue of whether or not an international double-tax treaty (DTT) overrides the Russian national thin capitalization rules, applicable to loans from foreign parent companies. According to the VAS’ holding in the Severny Kuzbass case, the non-discrimination clause of a DTT does NOT override the thin cap legislation. Accordingly, interest payments made to a foreign parent may be taxed differently from those made to a Russian parent. (document)

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