The law discussed immediately above also specifies the procedure for taxing interest payments on debt obligations paid to foreign companies. We draw your attention to the fact that the provisions concerned apply only to bonds issued prior to 1 January 2014.

The tax-free income at the source of payment in Russia includes interest income on the securities of the Russian Federation, constituent entities of the Russian Federation and municipal entities, as well as marketable bonds issued by Russian companies under the legislation of foreign countries. Tax is also not withheld if a Russian company pays interest income on marketable bonds that are registered in countries with which the Russian Federation has entered into treaties on the avoidance of double taxation.

The provisions have been in force since 1 July 2012, and they apply to legal relationships in respect of tax assessment and withholding tax from the income of foreign companies as of 1 January 2007.

[Federal Law No. 97-FZ “On Amending Parts One and Two of the Tax Code of the Russian Federation, and article 26 of the Federal Law ‘On Banks and Banking Activity’”, dated 29 June 2012]