Tax Alert 18/95 - 8 November 1995

LEASING AND INTEREST DEDUCTIONS

1. In this Tax Alert we summarize:

- tax implications applicable to lease arrangements as they are currently developing in Russia

- the rules for the deductibility of interest on loans payable by Russian companies, and

- amendments to the property tax rules for foreign companies

- possible changes in official attitudes to the tax status of sales out of customs (bonded) warehouses.

LEASING

2. In Russia two major types of lease arrangements are recognized: `short-term' and `long-term', although they are not primarily distinguished by length of lease period. They are defined in accounting regulations, mainly in the Chart of Accounts, and their differing tax implications are greatly influenced by the accounting treatment.