The state Duma passed a law clarifying the definition of “controlled debt”

The state Duma passed a law clarifying the definition of “controlled debt”


The purpose of the bill is to eliminate tax barriers to attracting funds into the Russian economy. The law will take effect no earlier than 1 January 2017.

MOSCOW, 29 Jan. The state Duma passed a law clarifying the concept of “controlled debt” in the inclusion of interest on debt obligations in the expenses when determining the tax base for profit tax for Russian organizations.

The concept of controlled debt by the law included the outstanding indebtedness of the taxpayer on debt obligations arising between related parties. In determining the amount of controlled debt will include all the liabilities of the taxpayer.

Controlled are encouraged to assume debt, first of all, when the lender is a foreign person participates directly or indirectly in the Russian organisation — the borrower. Secondly, when the lender is a related person of the foreign person that the interest to the borrower. Third, if the debt obligation is issued under a guarantee (suretyship) a foreign person that is interdependent with the organization of the borrower.

The law determines the conditions under which the receivable is not recognised controlled, in order to eliminate undue tax burdens upon the payment of interest in cases where the loan is issued by an independent Russian Bank (not being interdependent with the borrower), but under the guarantee (guarantee) foreign interdependent with the borrower faces.

The court may admit a controlled debt the outstanding debt of the taxpayer — Russian organization for other obligations, if it is determined that the ultimate goal of the payments are the payment to the said persons, to whom the debt is recognized as controlled.

Now controlled automatically recognizes the debt to the Bank, if there is a guarantor and surety — related parties. According to the law, if the borrower is a Russian organization fails the debt owed to foreign related person that was a guarantor, this debt will not be considered controlled.

The entry into force

The law should enter into force after its official publication, but its main provisions will take effect in a month after publication and not earlier than 1 January 2017. This is determined by the conditions of non-recognition of the debt of controlled debt in 2016. The debt of Russian companies is not treated as controlled from 1 January to 31 December 2016 with simultaneous execution of two conditions.

First, a debt obligation has arisen before Bank (including organizations recognized by the banks in accordance with the legislation of foreign States) that are not recognised as interdependent persons with the Russian organization-the borrower and persons acting surety, guarantor or otherwise undertake to fulfill this debt obligation.

Secondly, since the emergence of debt did not occur of the termination (fulfilment) of the obligation as in part principal and in part interest of the foreign organization and (or) affiliated with this organization, acting as surety, guarantor or otherwise undertake to fulfill this debt obligation.