Russia's Ministry of Finance recently issued guidance on the application of thin capitalization rules when a foreign company holds 20% or more of the equity of a Russian company, and that foreign company acts as a guarantor for a loan to the Russia company by a non-related Russian lender.
Under the law, the debt is considered controlled debt, and the deductibility of the interest payments is limited as per Russia's thin capitalization rules, which apply when a debt-to-equity ratio of 3:1 (12…