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Taxes Will Limit Foreign Lending

The Ministry of Finance will soon consider using taxes to deter Russian banks from denominating debt in foreign currencies.

When asked this proposal from the Bank of Russia, Alexei Kudrin, Russia's Minister of Finance., stated that “It is a matter of weeks. I am not prepared to speak about the parameters at this time.” Earlier, Aleksey Ulyukayev, First Deputy Chairman of the Central Bank, reported that the Central Bank of Russia introduced its own proposals about this issue, and that the Minister of Finance supported them. During the crisis, companies have had the right to claim interest expenses as Profit Tax deductions. The maximum interest rates have been set within the Tax Code. From August 1st to December 31st of last year, this maximum rate was equal to twice the Central Bank refinancing rate for ruble-denominated debt, and 22% for debt denominated in a foreign currency.

At the end of December 2009, a federal law was adopted extending the life of these regulations to June 30th, 2010. But a restriction was also established: preferential taxation began to be applied only to loans that were made before November 1st, 2009. In addition, the maximum value of interest on ruble loans has remained at the same level, while that on foreign currency was decreased to 15%.

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