On February 15, 2016 the President of the Russian Federation
signed Federal Law No. 25-FZ on Amendments to Article 269 of
Part Two of the Russian Federation Tax Code with Respect to
Defining the Term Controlled Debt (hereinafter the
"Law").
The Law substantially changes the rules for deducting interest
expense under thin capitalization rules that are aimed, as the
Law's authors have stated, at combating tax abuses, in
particular, those arising in so-called back-to-back financing, and
at eliminating unreasonable tax barriers to raising financing for
the Russian economy.
The most awaited change was the reflection in the Law of the
approach already used in court practice according to which debt not
only to Russian but also to foreign affiliates of the foreign
company that is a direct or indirect owner of an equity interest in
the borrower is considered controlled debt. That said, the
threshold for direct or indirect equity interest in the borrower
above which the
