Duma to debate taxation of Eurobond interest in April
MOSCOW. April 9 (Interfax) - The State Duma plans to debate amendments to exempt Russian issuers from the obligation of acting as the tax agent for profit tax on interest paid to bondholders in the second reading by the end of April.
"I think that in April we will go before the Duma in the second reading," the head of the Duma budget and tax committee, Andrei Makarov told Interfax.
The working version of the amendments was discussed Friday by the committee's expert council.
The amendments would exempt Russian issuers of having to act as tax agent for profit tax in regard to interest payments to bondholders registered in countries with which Russia has double taxation treaties.
The bill would apply to outstanding bonds listed or accepted for trading on one or several foreign stock exchanges and/or the rights to which are registered by depository and clearing organizations. The foreign stock exchanges and depository-clearing organizations must be included on a list approved by the Federal Financial Markets Service (FFMS) and endorsed by the Finance Ministry. These facts would be confirmed by the Russian organization on the basis of information received from these exchanges and depository-clearing organizations, issue prospectuses, and information from public sources.
The amendments would go into effect on the date of official publication and would apply to legal relations concerning calculation and withholding of tax from the income of foreign organizations that arose after January 1, 2007.
The head of the expert council, Mikhail Orlov voiced concerns at the meeting that the statutes of the bill would not be implemented until the FFMS approved the list of exchanges and depository-clearing organizations. "The absence of the list means that we cannot identify the outstanding securities," he said.
Orlov said it was necessary to work out how to write the bill so that its statues can be implemented even without this list.
The debate over taxation of coupon payments on Eurobonds began with a Finance Ministry letter to the Federal Tax Service clarifying the procedure for taxing interest payments on the Eurobonds of Russian companies issued through special purpose vehicles.
The letter said that Russia's double taxation agreements with other countries, in the case of interest income on Eurobonds, should be applied depending on the tax residency of the specific bondholder receiving the coupon payments, rather than the SPV through which the coupons are paid to the actual investors.