Alexei Yakovlev, Head of FBK Legal Tax Litigation Practice spoke at International Tax Congress

On February 2-3, 2012 International Tax Congress was held in Moscow organized by Chamber of Tax Advisers. FBK Legal was represented there by the head of Tax Litigation Practice, Alexei Yakovlev, who delivered during the session «Debt financing: Practical Aspects» his report dedicated to «Controlled Indebtedness: Its Definition and Complicated Issues». Alexei highlighted the so-called «thin capitalization» - special rules for accepting within tax expenses interests on debt liabilities recognized as controlled indebtedness. «Obvious tax advantage when granting a loan is opportunity to refer interests accrued on the loan to expenses and so to decrease your profit tax. Also when paying loan interests to the resident of a country there is a double taxation treaty with, incentivization (tax exemption) can be applied, as a result, national profit tax may not be paid, while income to an overseas loan issuer is paid”, the expert explained.

In his speech Yakovlev also addressed the case of a coal company “Severny Kuzbass”. Decree of Presidium of the Higher Arbitration Court with regard to this case brought up lots of questions, so regarding legitimacy of applying the OECD Model Convention Commentary for interpreting norms of international double taxation treaties. “Russia is not a member of OECD, there is no official translation of OECD Commentary to Russian, this is why relevancy of applying this document is doubted. To solve problematic issues it’s necessary to introduce the corresponding provisions into texts of international treaties or to issue official clarifications on behalf of relevant authorities on applying OECD Commentary towards provisions of international treaties. This is the only way for establishing normal legal basis to use OECD Commentary”, Alexei Yakovlev expressed his opinion.