On 6 June 2012 the Russian State Duma approved amendments to the Russian Tax Code to exclude Russian Eurobond interest payments from taxation. Thus, a Russian company that pays interest pursuant to a Eurobond structure will not have to act as a tax agent and withhold tax on payments of interest income.

However, two requirements shall be met for this exception to apply:

  • the SPV that issues the Eurobonds shall be registered in a jurisdiction that has an effective double tax treaty with the Russian Federation; and
  • both the stock exchange where the Eurobonds are listed and the relevant depositary / clearing organisation which holds the Eurobonds are recognised by FSFR and MinFin. Such list of the relevant stock exchanges and depositaries / clearing organisations is to be published in due course.

In terms of unlisted Eurobonds, the exemption would apply if rights to these Eurobonds have been registered in recognised depositary / clearing organisation.  

The new rules above will be introduced with retrospective effect starting from 2007 so that the new rules protect companies even from tax investigations for the year 2010. Russian tax investigations may look at the preceding three years. The second restriction above will be introduced when the relevant list is approved by the FSFR and MinFin.