In 2012 a few court cases were held whereby the Russian tax
authorities demonstrated their perseverance in identifying if
certain tax planning practices are acceptable or abusive.
One recent case which was upheld in the Russian courts was the
Eastern Value Partners Limited Case where the back-to-back debt
financing activities were challenged in the context of interest
withholding tax issues and the applicability of the Russian Cyprus
double tax treaty. In 2006, Cyprus company 'I' received
money under the terms of a loan agreement, from its Cyprus sister
company 'II' in order to purchase an office building in the
centre of Moscow. According to this loan agreement, Company I paid
the loan interest percentage and principal amount in favour of a
third party, namely a British Virgin Islands (BVI) company.
Although the Russian tax authorities lost the case (Decision of
the Moscow Arbitration Court No.A40-60755/1220-388 of 29 August
2012, upheld by the Decision of the 9th Circuit Arbitration Court
of Appeals No.09АП-33421.2012-AK) it is interesting
mainly because it is one of the first serious attempts by the
Russian tax authorities to limit the scope of application that only
the beneficial owner of the interest is allowed to the benefits of
In addition, it is expected that more attention will be paid to
anti-abuse cases within the context of international tax
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