The Protocol to the double tax treaty between Germany and Russia (effective from 1 January 1997) stipulates that for Russian companies owned by German residents and for permanent establishments of German companies in Russia advertising expenses and all types of interest are profits tax deductible in full. Under Russian legislation, significant limitations exist for deduction of advertising expenses, and only bank interest may be partially deducted (except for interest on loans used to purchase fixed or intangible assets, which is not deductible at all).
Instigated by an inquiry from the "Verband der Deutschen Wirtschaft in der Russischen Federation" (The German Chamber of Commerce in Russia), the Ministry of Finance has now issued a letter which confirms the full deductibility of such expenses for Russian companies with German equity and permanent establishments of German companies in Russia, on the condition that the expenses do not exceed arms-length prices, have been actually borne and are justified.
Similar clauses exist in the protocols to other treaties, but so far only the protocol to the Russia-Germany treaty has been substantiated by a written confirmation of the Ministry of Finance. Accordingly, companies may wish to reconsider their current corporate structures in Russia, as even partial transfer of shares in a Russian subsidiary to a German group company would grant access to the benefit.
Letter of the Ministry of Finance of 26 march 1997 no. 04-06-05
FEDERAL TAX AND CUSTOMS PRIVILEGES / CENTRALISED COMMISSION
A special commission is being established which will have the exclusive right to consider applications for tax and customs privileges and will act instead of Federal executive authorities. Tax privileges on a regional level can still be granted directly by the regional authorities.
GOVERNMENT REGULATION OF 11 MARCH 1997 NO. 287
FLEs purchasing and processing raw materials in Russia/ Subsequent export
If foreign legal entities buy raw materials in Russia and Russian enterprises produce goods from the materials, only the final product should be declared for export. An export passport is not necessary, but there are some particularities in filling out the Customs Freight Declaration.
Letter of the State Customs Committee of 3 March 1997 No. 01-15/3842
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Alla Shaulina on tel: +7 503 232 5511 fax: +7 503 232 5522 or e-mail directly: Alla_Shaulina@ru.coopers.com or enter a text search 'Coopers & Lybrand' and 'Business Monitor'.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The New Turkish Commercial Code ("New Code") has been enacted and will enter into force in July 2012. One of the major changes brought by the New Code regards mandatory independent audits of corporations.
The law about payment of dividends has remained substantially unchanged for thirty years.
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).