Point of law: what is the role of international treaties with regard to interest payments from Russian companies to foreign residents – whether they regulate the composition of expenses deductible at the taxation of the profit of Russian companies, or such composition must be determined in accordance with the rules of the Russian Tax Code?

Alternative views: 1) since the issues of taxation of interest payments relating to controlled debt are regulated by international treaties, the rules of the Russian Tax Code shall not apply; or 2) the rules of the Russian Tax Code shall apply, because the international treaties do not determine exactly which expenses should count as interest payments and thus their rules do not conflict with thin capitalisation rules provided for by Art 269 of the Russian Tax Code.

Ratio decidendi: the Presidium deemed the second view to be legally correct.

Practical consequences: in the Judgment there is no provision as to the possibility to reverse prior court decisions in analogous cases by way of procedure envisaged by Art 311 of the Commercial Procedure Code. However, this decision shall undoubtedly have considerable affect upon the future taxation practices with regard to interest payments of Russian “associated enterprises”.