The Russian Ministry of Finance, in Letter No. 03-08-13/6413 dated January 29, 2026, provided important clarifications regarding the necessity of withholding tax at source when providing financing to a foreign counterparty. These clarifications cover three types of transactions: contributions to authorized capital, contributions to property, and loan financing. Understanding these rules is critical for Russian companies investing in foreign assets or providing funds to their foreign partners.
What the Ministry of Finance Explained
1. Contribution to the Authorized Capital of a Foreign Company
A contribution to authorized capital is a reimbursable transaction: the investor receives an ownership stake in exchange for the funds contributed. Such a contribution does not generate taxable income for the foreign company in Russia. No withholding tax is required.
2. Contribution to the Property of a Foreign Company
Here, the approach is different. The Ministry of Finance considers a contribution to the property of a foreign organization as equivalent to a gratuitous transfer of property. Consequently, the income received by the foreign company is subject to withholding tax at source, unless otherwise provided for by an applicable double taxation treaty.
A key distinction for Russian companies: for them, income in the form of a property contribution is exempt from profit tax (Subparagraph 3.7, Paragraph 1, Article 251 of the Russian Tax Code). However, this exemption does not apply to the foreign recipient.
3. Loan Financing
The principal amount of a loan itself is not recognized as income for the foreign company, as issuing a loan is a reimbursable transaction: the lender acquires the right to demand repayment of the loan.
However, the Ministry of Finance emphasizes that subsequent write-off or forgiveness of the principal amount of a loan issued to a foreign company creates an obligation to calculate withholding tax on the amount of the written-off (forgiven) debt (see also Ministry of Finance Letter No. 03-08-05/3921 dated January 20, 2025).
Why This Matters for Businesses
Incorrect classification of transactions can lead to:
additional withholding tax assessments (fines and penalties);
tax disputes with foreign counterparties;
unreasonable costs due to withholding tax where it is not required;
risks during tax audits.
It is particularly important to note that the approach to property contributions differs for Russian and foreign entities: what is exempt for a Russian company is subject to withholding tax for a foreign recipient.
What Businesses Should Do
Carefully analyze the form of financing being provided.
For contributions to a foreign company's property, check whether an applicable double taxation treaty exists that could reduce or eliminate the tax.
For loans, track any subsequent write-off or forgiveness of debt, as this creates a new taxable event.
Document all transactions and, where necessary, request residency confirmation from the foreign counterparty.
How Acsour Can Help
Acsour experts are ready to:
advise on taxation issues related to transactions with foreign companies;
analyze the forms of financing and determine whether withholding tax is required;
prepare documentation for tax authorities and justify the company's position.
Contact us — we will help you properly structure financing for foreign companies and avoid unreasonable tax risks.