Thin Capitalization Rules: A Tax Reason to Consider Intra-Group Financing Structures

Abstract

The paper is devoted for the problem which is becoming more and more rigid in Russia and other post-Soviet states. This problem is called thin capitalization and basically relates to the special rules of deductibility of interest paid or accrued under the loans to a lender company when its financial position is not very good. In the majority of the EU states a rules of detecting thin capitalization are well functioning and are successfully applied by the fiscal institutions. The general principle of those rules is described in the paper.