Thin capitalisation & interest.

The thin capitalisation rule denies a tax deduction for excessive interest payments between related parties. In Russia, the rule sets a maximum debt to equity ratio of 3 : 1.

Interests can be deducted from taxable income provided that the interest does not exceed 20 per cent of the interest established by arm's-length parties in similar circumstances for the same period of time.

If similar examples in the same accounting period are unavailable, the maximum deductible interest is regarded as equal to the rate of Central Bank multiplied by 1.1 for rouble loans, and 15 per cent for loans denominated in a foreign currency.

In 2009 and first half of 2010 the assumed maximum arm's length interest will be the Central Bank's rate (currently 9 per cent) multiplied by two for rouble loans, and 15 per cent for loans denominated in foreign currency.