Tax Knowledge: Pre Tax Deduction For Staff Interest In Raising Capital

　　 First, policy Basis

The national tax Letter No. [2009]777 divides the interest expenses of enterprises to individual loans in two situations:

One is the interest expenditure of the natural person borrowing from the shareholders or other enterprises that are related to the enterprise, and does not exceed the same period of similar loan interest rate and the proportion of the related party's creditor's right investment and equity investment (the financial enterprise is 5:1, the other enterprise 2:1) can be deducted before the enterprise income tax.

The two is to pay interest interest payments to other personnel who do not have related relationship. If the loan is real, lawful and effective, and does not have the purpose of illegal fund-raising or other violations of laws and regulations, and at the same time, the loan contract is signed, the interest paid will not be allowed to be deducted before part of the similar loan interest rate of the financial enterprises.

　　 Two. enterprise Key concerns

1. whether the interest is not explicitly paid is deducted from the invoice before tax.

No. 777 is directed to deduct the interest rate paid by natural persons, but it is not clear whether invoices need to be provided. In terms of policy guidance, the provisions of article 777 are more humane, reflecting the combination of tax and actual conditions. However, in China, if the tax is controlled by tickets, if the enterprises fail to provide invoices in the actual implementation process, they will not exclude the risk that tax authorities require the tax adjustment of enterprises. It is suggested that enterprises should try their best to take tax invoices to the tax authorities to avoid their tax risks.

2. payment of interest shall be withheld in accordance with the relevant provisions.

(1) personal income tax

If an enterprise fails to obtain the invoice when paying interest to the natural person, the individual income tax shall be deducted according to the regulations when paying the natural person interest, and the personal income tax shall be withheld 20% according to the interest income. The eighteenth provision concerning the issuance of the regulations on certain issues concerning the collection of personal income tax ([1994]89) stipulates that the way of withholding the source of interest, dividends and bonuses shall be withheld, and the withholding agents shall be the units paying interest, dividends and dividends directly to the taxpayers.

The policy stipulates that the interest income exemption from personal income tax is limited to the financial institutions that draw public deposits under article 502nd of the State Council, and the interest income earned by individuals from loans to enterprises is not within the scope of tax exemption. Therefore, the interest payers should deduct the personal tax according to 20%.

(2) business tax

Personal interest income also needs to be paid business tax, but the interest paying party is not a statutory withholding agent of business tax. There is no statutory withholding obligation, but the possibility of tax withholding of business tax is not ruled out in the actual implementation.

The notice of the answer to business tax (Part one) ([1995]156) stipulates that no matter what financial institutions or other units, the act of lending funds to others should be regarded as a loan action, and a tax is levied according to the "finance and insurance industry" tax.

3. whether the interest rate of similar loans included floating rate is not clear during the same period.

Under the original internal tax law, the reply to the standard of pre tax deduction for interest payments on enterprise loans ([2003]1114) stipulates that the lending rates for similar institutions of the same period include the benchmark interest rate and the floating interest rate stipulated by the PBC. However, after the implementation of the new enterprise income tax law, there has been no relevant documents to explain the similar loan interest rate in the same period. In order to avoid tax risks, we recommend that the enterprises adopt the bank benchmark interest rate before the policy is clear.

4. what is legitimate business and natural borrowings are not clear?

The reply of the Supreme People's Court on how to confirm the effectiveness of lending behavior between citizens and enterprises ([1999] 3) stipulates that loans between citizens and non-financial enterprises (hereinafter referred to as enterprises) belong to private lending, so long as the parties' intentions are true, they can be identified effectively. In addition, according to the opinions of the Supreme People's Court on the loan cases handled by the people's Court (FA min FA [1991]21), the interest rate of private lending can be higher than the interest rate of the bank, but the maximum rate shall not exceed 4 times the interest rate of the same kind of bank loan, and the excess part shall not be protected by law.

Therefore, article 777 stipulates that the signing of a loan contract is to clarify that the loan relationship is the true meaning of the two sides, and it is true. At the same time, according to the interpretation of the Supreme Court, the interest rate does not exceed 4 times the loan interest rate of the same period, which is legally effective. However, whether the enterprise borrows from the individual is illegal fund-raising, whether it is lawful or not clear.

Illegal fund-raising means that the unit or individual does not raise funds in accordance with the statutory procedures approved by the relevant departments, issuing stocks, bonds, lottery tickets, investment fund securities or other creditor's rights certificates, and promises to repay the investors in a certain period of time in the form of money, material objects and their interests. Illegal fund-raising often shows the following characteristics: first, it has not been approved by the relevant departments in accordance with the law, including those authorized by the authorities without authorization; the departments with approval authority have approved the fund-raising beyond the authority. Two, we promise to repay capital and interest to investors within a certain period. The form of repayment of principal and interest is divided into monetary form and physical form and other forms. The three is to raise funds to the specific objects of the society. Here, "no specific object" refers to the public, rather than a specific minority. The four is to cover up the essence of illegal fund-raising in legal form.

Enterprise oriented Fund raising for staff and workers Generally, it has not been approved by relevant departments. It is an independent act between enterprises and individuals. Whether it belongs to "illegal fund-raising"? If all of these cases are illegal fund-raising, it means that the interest payments from enterprises to natural persons are not allowed to be deducted.

From the current policy orientation, it is inclined to think that the loan between enterprises and natural persons should be satisfied with the real and effective principle, and the loan contract is signed. If the fund is not used for illegal activities, the interest paid will not be deducted before the tax rate in the part of the same bank loan interest rate.