The Finance Ministry is holding consultations with Russian eurobond issuers in terms of taxation on eurobond interest payments. Russian tax authorities approached the Finance Ministry to get clarification on taxation rules applied to coupon income on eurobonds, Deputy Finance Minister Sergey Shatalov told Bloomberg yesterday. He said that under the current legislation coupons payable to holders of eurobonds via SPV companies are liable to tax, though this rule is not always followed.

“Our wing of the Finance Ministry does not agree with clarifications given in Shatalov’s letter, and we have voiced our standpoint on this issue,” said Deputy Finance Minister Sergey Storchak. He added that no action needs to be taken yet. “Shatalov just expressed his opinion, for it to have legal effect it is necessary to work out some legal document amending and clarifying the law. If the Department for Fiscal Policy starts drafting such a document, then we will actively discuss this matter.”

“This is an unprecedented story when the market has been around for many years, and suddenly the regulator decides that taxation rules were set incorrectly. However, I hope the Finance Ministry will make a sensible decision, though now the situation is not simple,” says deputy CEO of Sberbank Bella Zlatkis. She added that judging by Statalov’s words it’s impossible to conclude that new requirements will not be enforced; despite the standpoint taken by market players no one has promised that, but there is almost no doubt that the Finance Ministry will meet the needs of the market.

According to two bankers who took part in a meeting with Sergey Storchak yesterday, Storchak supports the market, and they got an impression that there is no ground for real concern so far. Moreover, Shatalov is not so radical on the issue, say those who met with him and Finance Minister Anton Siluanov yesterday.

Transneft does not rule out a buyback of its outstanding eurobonds due to “changes in tax environment”, the company’s spokesman said yesterday. The company has $4.3bn in eurobonds outstanding. The buyback will not be done in one go, but gradually in the course of the year. “The timing will depend on how fast we will be able to accumulate funds for buyback,” the source noted. Sberbank has not considered such an option, according to Zlatkis.