Russia: Judicial Trends in Thin Capitalization

For the purpose of protecting domestic interests, most states limit taxpayers’ ability to recognize interest on loans or credits as expenses reducing corporate profit tax payments, particularly where such interest is paid to a related entity outside the state. In tax practice such limitations are called “thin capitalization rules.  This article reviews the prevailing judicial trends within Russia on the question of the application of the Thin Capitalization Rules, particularly in relation to the operative Double Taxation Treaties.

The Moscow Times – Russian Thin Capitalization Rules in Light of Double Taxation Treaties: Trends in Court Practice