New version of the draft law: thin
capitalization rules
did undergo changes
What's done:
In our publication of 17 February, we informed you about the amendments to Article 269 of
the Tax Code, i.e., about the preparation of Draft Law No. 675906-6 for the second reading.
On 8 March the Law has been signed by the President.
In comparison with the text prepared for the second reading in the State Duma, the version
of the Law No. 32-FZ signed by the President underwent technical changes.
The Law was initially intended to amend Article 269.2 of the Tax Code concerning thin
capitalization rules, but the proposed amendments were replaced by anti-crisis measures. As
we have mentioned, the exclusion of the provisions concerning amendments to the thin
capitalization rules from the draft law could be due merely to the postponement required to
develop the provisions.
Our forecasts concerning the emergence of a new developed draft law on changes to the thin
capitalization rules came true: on 17 February, the State Duma Council adopted the decision
to include in its model program the State Duma's consideration of a new draft of Law No.
724609-6 On the Introduction of Amendments to Article 269 of Part Two of the Tax Code of
the Russian Federation Concerning the Definition of the Notion of Controlled Debt.
What's new:
The text of Draft Law No. 724609-6 is largely identical to the version of Draft Law
No. 675906-6, which was prepared for the first reading.
The main amendments to Article 269.2 of the Tax Code, introduced by the initial version of
Draft Law No. 675906-6, were considered in detail in our publication of 15 January.
The main substantial change as compared to the version of Draft Law No. 675906-6 is the
return of the indication that a Russian borrower has a foreign shareholder so as to recognize
a debt as being controlled.
A controlled debt will be deemed an outstanding debt of a Russian organization in respect of
the following debt obligations:

to a foreign entity which is deemed to be interrelated with the Russian organization if
the foreign entity participates directly or indirectly in the Russian organization;

to a Russian entity which is deemed to be interrelated with the aforesaid foreign
organization;

to the entity in respect of which such a foreign entity and/or its Russian interrelated
entity directly acts as the surety or guarantor or otherwise undertakes to ensure the
fulfillment of the debt obligation.
As previously, the new draft law is to exempt the Russian organizations' debt to Russian
banks from the thin capitalization rules if certain terms are met.
What this means to us:
Although more work should be done on the text of the draft law, the expected directions in
which the thin capitalization rules will be changed and will be in force from 2016 are quite
clear. In this respect, the companies are recommended to analyze the existing financing
structures and assess the effect of the proposed changes on the structures.
We will keep you in touch about the future of this draft law.