On 3 July 2013 the State Duma of the Russian Federation approved on second reading, the draft amendments to the Russian Tax Code including the possibility of abolishment of the withholding tax on interest paid on Russian Eurobonds after 2013 with no time constraint.
Currently, the withholding tax has been waived till the end of 2013 on Eurobonds issued between 1 January 2007 and 1 January 2014 only.
The draft amendments approved by the State Duma aimed to exempt from the withholding tax, the interests paid out on all tradable Eurobonds of beneficial owners registered in the countries that have a valid double tax treaty with Russia.
To be eligible for tax exemption, the tradable Russian Eurobond should also:
• Be listed and traded on a foreign stock exchange; and/or
• Be held in safekeeping by a depository/clearing organization.
Furthermore, such foreign stock exchange and/or depository/clearing organization must be included in the list approved by the Federal Financial Market Service (FFMS) of Russia and the Ministry of Finance (MinFin) of Russia.
Impact on investors: The abolishment of the withholding tax on interests paid on the Russian Eurobonds should improve the investment possibilities for foreign investors.