Newsletter: “Tax-free” debt relief related to loans extended to 2023

The draft law with a large number of various amendments to the Russian Tax Code was adopted in the Russian parliament. We expect that the draft will soon be signed by the President.

 

The draft law includes, inter alia, profits tax exemptions, which have been sought by companies for a long time. First and foremost, the highlight is the profits tax exemption for the debt relief carried out in 2023 regarding loan agreements with foreign lenders. Therefore, the exemption largely used by companies in 2022 will be applicable also in 2023. Accordingly, debt relief was exempt from profits tax, inter alia, in the following situations:

 

  • in regard to loan agreements with foreign persons concluded before March 1st, 2022 (including interest deducted for tax purposes);
  • in regard to the assignments of rights to claims under the above loan agreements;
  • in regard to payments to foreign shareholders upon retirement from the Russian company.

 

In addition, debt relief related to the purchase of (equity) shares in Russian companies is also exempt from the tax in 2023. This refers to (equity) shares sold by foreign participants in the period after March 1, 2022 and until the end of 2023.

 

It might be likely that this way the new owners of the former Russian subsidiaries of Western groups of companies will be supported, so that the new shareholders will be able to better facilitate continuation of the activities of these ex-subsidiaries. This exemption could be especially interesting for so-called management buy-out deals.

 

Once the new law is enacted, the exemptions will apply retroactively from the beginning of 2023. These new and unambiguously positive rules will certainly be applied by a wide range of companies.