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Minfin Proposes to Lift Tax on Russian Eurobond Coupons

13.05.2013 21:14 / MIFC

The Russian Ministry of Finance proposes tax exemption for Russian Eurobond coupons, Minister Anton Siluanov said at a parliament hearing on the key issues of Tax Policy 2014-2016.

Existing law provides a coupon tax for Russian Eurobonds placed through offshore SPVs.

In early 2012, Minfin posted a clarification of Eurobond taxation rules, levying a substantial additional tax on Russian companies. However, to avoid complications for Russian issuers, the Government passed a decision to postpone the new rules until end-2013, giving Minfin time until 2014 to finalize their approach to coupon tax.

The Finance Minister considers it best for the Government to refrain from pursuing fiscal goals in this case. “There is not a lot of money to be collected here anyway”, said Siluanov, adding that tax exemption must apply to foreign bond owners only, to prevent tax evasion by Russian taxpayers. “Naturally, full exemption must only apply on condition that Russian taxpayers are not beneficiaries of these coupon payments channeled through offshores”, stressed the Finance Minister.

Bringing taxation of earnings from Eurobonds and local debt in line with each other “is logical in theory,” says Head of MIFC Taskforce Alexander Voloshin. “How to act still needs to be discussed.”

While taxing Eurobond coupons will “obviously make resources more expensive for Russian companies, it’s not at all evident that it will help the market for our bonds,” Voloshin said.

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