Upper Limit of Deductible Interest Increased up to Twofold CBR Rate on August 1

05.08.2009

Federal Law No. 202-FZ of 19.07.2009 “On amendments to Chapters 23 and 25 of the RF Tax Code and on the repeal of individual provisions of the Federal Law “On amendments to Part One and Part Two of the RF Tax Code and individual legislative acts of the RF””

The legislators have temporarily increased for the ruble borrowers the upper limit of tax-deductible interest on credits and loans. In August 1 – December 31, 2009 the revised limit will be the twofold official rate of the RF Central Bank (the former limit in effect from January 1 to July 31 was 1.5-fold official rate). The revised limit shall apply to the interest accrued after August 1 irrespective of the effective date of the agreement. Same as before, for the purpose of interest calculation for loans providing for the interest rate adjustment one should apply the official rate as of the end of reporting period, otherwise the official rate as of the loan extension date applies.

Besides, the legislators have clarified the issue whether one can opt between the methods of interest rate setting, i.e. on the basis of either the official rate or rates under comparable credits and loans. Formerly this issue used to give rise to numerous disputes since it had ambiguous statutory wording. Now the respective provision has been refined for the avoidance of doubt: which method to apply is up to the taxpayer.