The Ministry of Finance of the Russian Federation (the “Finance Ministry”) has indicated that holding companies which extend interest-free loans to affiliated parties must pay a profit tax on the amount of the profit that has not been received.

The Finance Ministry has indicated that the granting of interest-free loans by related parties is a service; therefore, it has recognised such loans as being a controlled transaction. This is done for profit tax purposes for which the lender must render payment.

Consequently, such an interpretation of the law makes it risky to use interest-free loans within company groups. This will affect financing within holding groups.

[Letter No. 03-01-07/5-12 of the Ministry of Finance of the Russian Federation, dated 25 November 2011]