Can the unpaid loan interest be deducted before tax?

Guo Shui Han [2009] No. 777, all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state plan.

State Taxation Bureau, Local Taxation Bureau:

The issue of pre-tax deduction of enterprise income tax on interest expenses borrowed by enterprises from natural persons is hereby notified as follows:

1. The enterprise has a relationship with shareholders or other related to the enterprise.

The interest expense of the loan of natural persons shall be in accordance with the Enterprise Income Tax Law of the People's Republic of China.

Hereinafter referred to as the tax law) and the notice of the Ministry of Finance and the State Administration of Taxation on tax policy issues related to the pre-tax deduction standard for interest expenses of related parties of enterprises (Cai Shui [2008] No. 121), the deduction amount of enterprise income tax shall be calculated.

2. If the interest expense of an enterprise borrowed from internal employees or other personnel other than that specified in Article 1 meets the following conditions at the same time, the interest expense shall be deducted in accordance with Article 8 of the Tax Law and Article 27 of the Regulations for the Implementation of the Tax Law if the interest expense does not exceed the amount calculated according to the interest rate of the same type of loan of the financial enterprise in the same period.

The official website shall prevail.

Q: Can an enterprise deduct the unpaid loan interest due to financial reasons?

Answer: According to the provisions of the "Enterprise Income Tax Law" and the "Regulations for the Implementation of the Enterprise Income Tax Law", the reasonable expenses actually incurred by an enterprise in connection with the acquisition of income, including costs, expenses, taxes, losses and other expenses, are allowed to be deducted when calculating the taxable income.

Reasonable borrowing expenses incurred by enterprises in production and business activities that do not need to be capitalized are allowed to be deducted if they meet the following conditions: 1Interest expenses incurred by enterprises on borrowings from financial enterprises.

2.The interest expense of an enterprise borrowing from a non-financial enterprise shall not exceed the amount calculated according to the interest rate of the same type of loan of the financial enterprise in the same period. The Enterprise Income Tax Law and the Regulations for the Implementation of the Enterprise Income Tax Law stipulate that the loan interest incurred is allowed to be deducted, and the interest expense here is required to be actually incurred, that is, actually paid.

If the unpaid interest is formed by an unrelated party, it can be deducted before tax.

Article 9 of the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China stipulates that "the calculation of the taxable income of an enterprise shall be based on the principle of accrual accounting, and shall be regarded as the income and expenses of the current period, regardless of whether the payment is received or paid; Income and expenses that do not belong to the current period, even if the money has been quietly awarded for the current period, are not regarded as current income and expenses. Except as otherwise provided by these Regulations and the competent financial and taxation authorities.

Cai Shui [2008] No. 121: In order to standardize the pre-tax deduction of interest expenses of enterprises and strengthen the management of enterprise income tax, the issue of pre-tax deduction of interest expenses on creditor's rights investment of related parties is hereby notified as follows:

1. When calculating the taxable income, the interest expenses actually paid by the enterprise to related parties shall not exceed the proportion specified below and the relevant provisions of the tax law and its implementing regulations, and the excess part shall not be deducted in the current period and subsequent years. ”

In this document, it is clarified that the interest expense of related parties must be actually paid. If the withholding is not paid, it cannot be deducted before tax.

However, for non-related parties, there are no special provisions for interest expense. Since there are no special provisions, the general provisions can be applied, that is, the accrual principle can be adopted, and the pre-tax deduction can be made during the period when the interest is actually accrued, rather than the period during which the interest is actually paid.

The standard for pre-tax deduction of interest expenses is as follows: 1. The interest expense of the first housing loan incurred by the taxpayer himself or his spouse using a commercial bank or housing provident fund personal housing loan alone or jointly to purchase a house in China for himself or his spouse shall be deducted according to the standard fixed amount of RMB 1,000 per month in the year in which the loan interest is actually incurred, and the maximum deduction period shall not exceed 240 months. Taxpayers can only enjoy the interest deduction on the first home loan.

The term "first housing loan" in these measures refers to the housing loan for the purchase of housing and the interest rate of the first housing loan. Two auspicious banquet skins, by the agreement of the husband and wife, can choose to be deducted by one of the parties, and the specific deduction method cannot be changed within a tax year. The first housing loan incurred by the husband and wife respectively before marriage, the loan interest expense, after marriage, can choose one of them to purchase a house, by the purchaser according to the deduction standard of 100, can also be deducted by the husband and wife according to the deduction standard of 50, the specific deduction method can not be changed in a tax year.

Articles 14 and 15 of the Interim Measures for Additional Deduction of Individual Income Tax Special Xiangzhou.

If the company adopts equity incentive measures, it is largely to encourage and retain talents, and according to the relevant laws of China, enterprises need to pay annual taxes, including dividends, bonuses and other income. Case Facts - Whether the Expenses Accrued for Equity Incentive Accrual Can Be Deducted Before Enterprise Income Tax Case Introduction: A listed company formulated an equity incentive plan in 2019 and granted 100 shares of ** options to each of the company's 100 executives, and at the same time agreed that these executives should serve in the company for 3 consecutive years from January 1, 2019, that is, they can purchase 100 shares of the company ** at a price of 10 yuan per share, and the option is 33 yuan on the grant date with the draft of the agreement.

The company made a provision for management expenses of 11,000 yuan in management expenses. Case Analysis: The implementation of the equity incentive mechanism by listed companies is essentially to reduce the capital reserve of the enterprise in exchange for the services of the company's incentive objects; That is, through the reduction of capital reserve, the remuneration paid to the incentive recipients for providing services.

Therefore, the expenses incurred by the equity incentive mechanism belong to the category of employee remuneration and are allowed to be deducted before tax. According to Announcement No. 12 of 2018 of the State Administration of Taxation, after the implementation of the equity incentive plan, if the rights can only be exercised after a certain number of years of service or the specified performance conditions are met, the relevant costs and expenses calculated and confirmed in the accounting during the waiting period shall not be deducted before tax in the corresponding year. After the exercise of the rights, the listed company shall calculate and determine the difference and amount of the fairness of the incentive and the actual payment of the incentive object as the wage and salary expenses of the current year, and deduct it before tax in accordance with the tax regulations.

Therefore, the equity incentive expense of 11,000 yuan accrued in the company's management expenses in 2019 did not actually occur in 2019, so it cannot be deducted before tax in that year. It can only be deducted before tax until the actual exercise year. Relevant legal provisions:

1) Income from the sale of goods; (2) Provision of labor income; (3) Income from the transfer of property; (4) Dividends, bonuses and other equity investment income; (5) Interest income; (6) Rental income; (7) Royalty income; (8) Receiving income from donations; (9) Other income.

Article 6 of the announcement of the State Administration of Taxation on several issues concerning enterprise income tax (Announcement No. 34 of 2011 of the State Administration of Taxation) stipulates that if an enterprise fails to obtain a valid certificate of the relevant costs and expenses actually incurred in the current year due to various reasons, the enterprise may temporarily account for the amount incurred on the book when paying the quarterly income tax in advance; However, when the credit is settled, the effective voucher of the cost and expense should be supplemented.

Therefore, as long as there is a payment voucher before the final settlement, it can be deducted, otherwise it cannot be.

Expenses that have not actually been paid are not deductible before tax. The benefit period is included in the cost of the product or the cost of the commodity circulation, and the actual payment is made in the following month. However, the interest expense shall be borne by the cost of the product or the circulation fee of the product for each month before the interest is paid.

The provision and payment of withholding expenses is made through the "Withholding Expenses" account. The account is credited (or increased) when a provision is made, and the account is debited (or decreased) when a fee is paid. The balance of the credit (increase) side, which indicates that the expenses that have been withheld but have not yet been paid, are listed as the items of expenses withheld in the balance sheet.

1. Expenses that have not actually been paid are not deductible before tax.

2. According to the provisions of the "Enterprise Income Tax Law of the People's Republic of China and the People's Republic of China" and the "Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China", reasonable expenses related to the acquisition of income, including costs, expenses, taxes, losses and other expenses incurred by the enterprise in actual hidden signs, are allowed to be deducted in the calculation of taxable income. The expense is only accrued and not actually paid, so it cannot be deducted before tax.

3. Pre-tax deduction refers to the statement when calculating income tax. This is where there is a difference between accounting law and tax law:

1. In the accounting treatment, the actual expenses incurred are recorded.

2. When calculating and paying income tax (that is, the provisions of the tax law), there are some expenses that are not allowed to be paid before tax, and the profit must be increased. It can also be said that expenses that are not allowed to be deducted before tax are subject to income tax.