Clarifications whether debt forgiveness represents taxable income

Recently, the Ministry of Finance issued Letter 03-03-06/1/3094, clarifying the corporate income tax implications when a parent company forgives the debt owned by its subsidiary.

A Russian joint stock company (Company) took a loan from a foreign legal entity. In its turn, the loan was further assigned to another foreign legal entity that is fully owned by the Company (the initial debtor). The Company agreed to forgive the foreign subsidiary for the outstanding debt under the loan agreeme…