In 2016 the RF Supreme Court issued a precedent-setting decision
by clarifying the procedure for applying thin capitalization rules
to interest on controlled debt when a lender is a Russian company.
The court supported the taxpayer's position and stated that
reclassification of interest into dividend and its subsequent
taxation at source under Article 269(4) of the RF Tax Code (in the
version in effect until 2017) do not apply if there is no evidence
of a disguised dividend payment (RF Supreme Court Ruling No.
305-KG15-14263 of March 18, 2016, in the Novaya Tabachnaya
Kompaniya LLC case).
The court noted that Chapter 25 of the RF Tax Code does not
contain provisions according to which dividends not received could
be treated as taxable income, thus, withholding taxation at source
would result in double taxation, and the absence of rules
eliminating double taxation and existing legal uncertainty should
be interpreted in the taxpayer's favor. As a result, the
Supreme
