The Ministry of Finance and the State Tax Service have issued a joint letter which specifically deals with the taxation of the recently issued Eurobonds. The letter confirms that foreign legal entities trading Eurobonds offshore do not have a permanent establishment in Russia due to the mere fact of trading or performing of any services related to the trading. Purchase agreements can contain "tax clauses" which increase the amount to be paid out in case of new taxes which were not foreseen when the contract was concluded. Only when traded through a permanent establishment may turnover from the sale of Eurobonds give rise to road users tax. Housing tax can be levied on the same basis by the local tax authorities. It is also confirmed that interest income on Eurobonds is exempt for Russian profits tax and personal income tax purposes.
Letter of the Ministry of Finance and the State Tax Service of 18 November 1995 No. 1-35/105 and PV-6-08/795
S-ACCOUNTS / GKO'S
The US$ yield on S-accounts has dropped to 13% annually. Foreign entities are allowed to purchase Russian GKO's through S-accounts. By setting the exchange rate for which the GKO rouble yield is converted into foreign currency, the Russian authorities have limited the yield which can be received by foreign investors.
CENTRAL BANK REFINANCING RATE
Effective 2 December 1996, the refinancing rate of the Central Bank has dropped from 60% to 48%. The CB refinancing rate is used, inter alia, as a calculation basis for late payment interest of the Pension Fund (which is now 1/300 of 48% makes 0.16% per day) and the interest to be paid on under-declared prepayments of profits tax.
For further information contact Bauke van der Meer on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: Bauke_van_der_Meer@ru.coopers.com or enter a text search 'Coopers & Lybrand' and 'Business Monitor'
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