11.05.08

Many find that borrowing money from foreign banks is a much better deal than working with Russian credit organizations. However, it leads to certain technical difficulties. For one, it is unclear what the tax assessment method is for interest paid by a Russian bank to a foreign (Swiss) bank for financing delivery of equipment in view of the tax treaty between Russia and Switzerland for avoiding double taxation from November 15, 1995.

The Ministry of Finance answers clearly: interest paid by a Russian bank to a Swiss bank for financing equipment delivery is subject to taxes according to legislation of the Swiss Confederation. A Russian bank does not withhold tax from the foreign bank if the location of the foreign bank can be confirmed as required by Article 310, paragraph 2, subparagraph 4 of the TC. This is according to the Letter # 03-08-05 from March 21, 2008.

Source: Российский налоговый портал