Does an interest-free loan count as an economic benefit?

Withholding personal income tax from material benefits

In order to determine at what rate material benefits are subject to personal income tax, it is necessary to find out what material benefits are and from what sources they are generated.
Income in the form of material benefits arises for the taxpayer on the following grounds (Article 212 of the Tax Code of the Russian Federation):

1. Saving on interest on borrowed funds received from an organization or entrepreneur.
2. Price difference when purchasing material assets from interdependent persons (entrepreneurs, organizations) under civil contracts.
3. Price difference when purchasing securities and financial instruments of futures transactions.

Material benefits are subject to personal income tax in full for all the above reasons. However, there are some peculiarities when obtaining savings on interest for using credit funds.

Firstly, the following are not subject to taxation:

• Benefit in the form of an interest-free credit period using a bank card, received from a bank located in the Russian Federation.
• Interest savings when using loan funds for the construction or purchase of new housing (rooms, apartments, shares) or land for construction in the Russian Federation. This exception applies if the taxpayer has the right to a property deduction, which is confirmed by the tax authority (subclause 1, clause 1, article 212 of the Tax Code of the Russian Federation).
• Saving on interest when refinancing or refinancing loans for the purchase or construction of new housing (apartments, houses, rooms, shares) or land plots for the construction of residential buildings. Valid if there is a valid right to a property deduction, confirmed by the tax authority (subclause 1, clause 1, article 212 of the Tax Code of the Russian Federation).

NOTE! Starting from 2021, financial benefits arising during mortgage holidays are not subject to personal income tax.

Secondly, from 2021, savings on interest for the use of borrowed (credit) funds are recognized as personal income tax income only in cases if:

• the loan was received from an organization or individual entrepreneur that is interdependent with an individual or with which an employment relationship has been established;
• such savings are actually material assistance or a form of reciprocal fulfillment of an obligation to an individual.

It does not matter when the contract was concluded.

If borrowed funds are provided not by a credit or banking institution, but by another enterprise, then personal income tax is withheld from the above savings on a general basis (letter of the Ministry of Finance of Russia dated October 28, 2010 No. 03-04-06/6-256).

Borrower - organization

No, it does not apply. When calculating income tax, organizations take into account income from sales and non-operating income (clause 1 of Article 248 of the Tax Code of the Russian Federation). In the list of non-operating income given in Article 250 of the Tax Code of the Russian Federation, the material benefit received by the organization from the interest-free use of borrowed funds is not named. Of course, this list is not closed, but in order for the amount of benefit to correspond to income, it is necessary that the possibility of its assessment be provided for in Chapter 25 of the Tax Code of the Russian Federation (Article 41 of the Tax Code of the Russian Federation). And Chapter 25 of the Tax Code of the Russian Federation does not contain a procedure for assessing income in the case under consideration.

This is also confirmed by officials, as evidenced, for example, by letters from the Ministry of Finance of Russia dated March 23, 2017 No. 03-03-RZ/16846, dated February 9, 2015 No. 03-03-06/1/5149.

Cheat sheet on the article from the editors of BUKH.1S for those who do not have time

1.

Civil legislation does not contain a ban on providing interest-free loans. But the fact that the loan is interest-free must be noted, since by default the loan agreement is considered interest-bearing.

3. When receiving an interest-free loan, an individual borrower may

income arises in the form of material benefits from savings on interest, subject to personal income tax.

4. For a borrower who is an individual entrepreneur using the OSNO, simplified tax system and unified agricultural tax, income in the form of material benefits from savings on interest is subject to personal income tax.

5. With individual entrepreneurs using PSN or UTII, the situation is as follows: tax authorities and courts do not agree that when using an interest-free loan for business purposes, the obligation to tax personal income tax does not arise for material benefits from saving on interest. You will still have to pay tax.

Material benefit of personal income tax - 2020-2021

The Tax Code reflects the rates for taxation of material benefits with personal income tax in 2020-2021. Thus, if an individual receives a material benefit, the personal income tax rate may be as follows:

1. For residents of the Russian Federation, a rate of 35% applies to the excess of the interest savings received from the tax agent over the value of 2/3 of the Bank of Russia refinancing rate on the date of receipt of income on loans in rubles and 9% per annum on loans in foreign currency.
2. For residents of the Russian Federation, a rate of 13% is established for amounts of material benefits on goods purchased from related parties and transactions with securities.
3. For non-residents there is a flat rate of 30% for all reasons for the occurrence of material benefits.

Read more about rates in the article “What percentage is personal income tax.”

How to calculate material benefits based on interest?

This is the most common type of financial benefit, so we will show the tax calculation for it.

The procedure for calculating material benefits from savings on interest is prescribed in paragraph 2 of Art. 212 of the Tax Code of the Russian Federation.

Loan in rubles

If the loan was received in rubles, then the material benefit is calculated as the excess of the amount of interest for the use of borrowed (credit) funds expressed in rubles, calculated on the basis of two-thirds of the current refinancing rate established by the Central Bank of the Russian Federation on the date of actual receipt of income, over the amount of interest calculated based on the terms of the contract.

The calculation of material benefits received in rubles can be expressed by the formula:

MV = SZ × (2/3 × StCB – StZ) / DG × DZ,

Where:

MB - material benefit;

SZ - loan amount;

StCB - refinancing rate of the Central Bank of the Russian Federation on the date of receipt of income;

See the rate for different periods here.

StZ - loan rate;

DG - number of days in a year: 365 or 366;

DZ - the number of days of using the loan, including interest-free.

An example of calculating personal income tax on material benefits from savings on interest on loans in rubles from ConsultantPlus. On June 3, 2021, the employer issued Kashin K.K. to the employee. (tax resident of the Russian Federation) loan in the amount of 500,000 rubles. at 4.5% per annum until December 1, 2021. The refinancing rate of the Bank of Russia during this period is 7.5% (conditionally). In this case, Kashin K.K. There is a material benefit when saving on interest, since 4.5% < 5% (2/3 x 7.5%). The employee transferred the entire loan amount and the interest accrued for the period of use of the loan to the organization’s account on November 30, 2021. The employer calculated personal income tax on material benefits as follows. You can view the entire example in K+. Trial access is free.

When calculating material benefits, the following must also be taken into account:

1. Material benefit is considered received on the last day of each month during the entire term of the loan agreement. That is, regardless of when interest is paid and whether it is payable according to the agreement, the material benefit is calculated monthly.

It should be taken into account that if the loan was repaid not on the last day of the month, but on some other day, then the material benefit is still calculated on the last day of the month (see letter of the Ministry of Finance dated January 14, 2016 No. 03-04-06/636 ).

2. If within a certain month the loan was partially repaid, then the material benefit is calculated in 2 steps: on the date of repayment of the loan and on the last day of the month.

Loan in foreign currency

If the loan was received in foreign currency, then the material benefit is calculated as the excess of the amount of interest for the use of borrowed (credit) funds expressed in foreign currency, calculated on the basis of 9% per annum, over the amount of interest calculated on the basis of the terms of the agreement.

The calculation of material benefits received in foreign currency can be expressed by the formula:

MV = SZ × (9% – StZ) / DG × DZ,

Where:

MB - material benefit;

SZ - loan amount;

StZ - loan rate;

DG - number of days in a year: 365 or 366;

DZ - the number of days of using the loan, including interest-free.

An example of calculating personal income tax on material benefits from savings on interest on loans in foreign currency from ConsultantPlus The Organization issued on May 13, 2021 to employee Semenov N.N. (tax resident of the Russian Federation) loan in the amount of 10,000 euros at 4% per annum until August 1, 2021. In this case, Semenov N.N. There is a material benefit when saving on interest, since 4% < 9%. The employee transferred the entire loan amount and accrued interest to the organization’s account on July 31, 2021. Let’s assume that the euro exchange rate as of 05/31/2020 was 63.26 rubles, as of 06/30/2020 - 67.50 rubles, and as of 07/31/2020 - 65 ,80 rub. The employer calculated personal income tax on material benefits as follows. Get a free trial of K+ to see the full example.

Responsibility for violation of the terms of the agreement

The loan agreement must stipulate the consequences that await the borrower in case of late payment of the debt. It is better to avoid delays, as this can lead to an unpleasant situation.

Let's consider what consequences a borrower can expect if there is a delay or non-payment of a loan:

• early withdrawal of the loan by the lender in full;
• accrual of penalties;
• recovery from existing collateral;
• the creditor's appeal to the court and forced collection of debt;
• damaged credit history (if the loan was issued by the IFC).

If the borrower is in arrears under the loan agreement, the lender may send him a demand for immediate repayment of the entire amount of the debt.

In this case, he will be obliged to pay interest based on the actual period of use of the money.

Typically, the agreement provides for the accrual of fines and penalties for each day of delay. They can be used even in the case of an interest-free loan and sometimes reach colossal sizes.

In court, the debt can be recovered from the funds and property of the debtor, as well as guarantors, if any. If a certain property is pledged, the foreclosure will be directed specifically at it.

The credit history currently reflects information about all loans received from microfinance companies.

Delays will negatively affect the borrower’s credit history and may lead to refusals on further applications.

Other nuances of personal income tax with matvygoda

Do not forget that the calculation of material benefits and the personal income tax calculated from it must be documented. For this purpose, an accounting certificate is drawn up.

REFERENCE: The material benefit from saving on interest is reflected in the 2-NDFL certificate under income code 2610.

When calculating personal income tax, remember that income in the form of material benefits is not reduced by tax deductions (clause 4 of article 210 of the Tax Code of the Russian Federation).

The calculated personal income tax on material benefits must be withheld from the nearest cash income paid to the borrower. In this case, the total amount of personal income tax withheld cannot exceed 50% of the income paid. If the balance of personal income tax on material benefits remains undeducted, then it must be withheld at the next payment of income. If this fails, at the end of the year the unwithheld tax must be reported to the tax certificate 2-NDFL with sign 2.

NOTE! Calculated personal income tax, including on material benefits, cannot be withheld from payments that are not income. For example, personal income tax on material benefits cannot be withheld when reimbursing overexpenditures of accountable money by issuing a loan (clause 4 of article 226 of the Tax Code of the Russian Federation).

If personal income tax calculated on material benefits was withheld when paying vacation or sick pay, then the withheld tax on material benefits must be paid no later than the day of its payment, and the withheld tax on vacation or sick pay can be paid later, but no later than the last day of the month of their payment (clause 6 Article 226 of the Tax Code of the Russian Federation).

Example:

As of March 31, a material benefit was calculated in the amount of RUB 8,000. and personal income tax was calculated on material benefits in the amount of 2800 rubles. (8,000 × 35%). On April 4, vacation pay was calculated in the amount of 54,000 rubles, personal income tax on which is 7,020 rubles. (54,000 × 13%), and vacation pay was transferred to the employee minus the calculated personal income tax on vacation pay and financial assistance in the amount of 44,180 rubles. (54,000 – 7,020 – 2,800). Pay personal income tax on financial assistance in the amount of 2,800 rubles. You need to pay personal income tax on the amount of vacation pay in the amount of 7,020 rubles no later than April 5. Needed no later than April 30th.

KBK personal income tax for material benefits in 2020-2021 is the following - 182 1 0100 110.

Material benefits from savings on interest are not subject to insurance premiums.

Taxation (2014) of a loan to an individual from a legal entity

First, let's look at the tax consequences for individuals. The borrower is required to pay taxes when receiving material benefits.

When receiving a loan from a legal entity, economic benefit arises in the following situations:

• when concluding an interest-free loan agreement;
• when concluding a loan agreement at a reduced interest rate (the rate does not exceed 2/3 of the refinancing rate).

In both cases, the borrower benefits from interest savings. This is discussed in more detail in Article 212 of the Tax Code. Income is any benefit received from savings on interest as a result of using loans issued by organizations or individual entrepreneurs.

The exceptions to this rule are the following:

• receiving benefits from using bank cards with an interest-free period;
• if an interest-free loan was provided for the construction or purchase of real estate on the territory of the Russian Federation (house, apartment, room, land plot with a house or plot intended for building a house);
• obtaining benefits as a result of refinancing a bank loan issued for the purchase or construction of housing;
• the borrower is exempt from paying tax provided that he has the right to receive a property tax deduction (the rule applies to points 2 and 3 from this list).

Loans to an individual from a legal entity are subject to personal income tax if the result of such a loan was the receipt of material benefits from savings on interest.

When concluding a reimbursable agreement at a reduced rate, the material benefit is calculated as the excess of the amount calculated at 2/3 of the refinancing rate over the amount calculated in accordance with the interest specified in the agreement.

The date of actual receipt of material benefits from savings on interest is the day the interest is paid. The tax base is determined on the day of interest payment with a frequency of at least once a year.

In accordance with tax legislation (articles and), the borrower has the right to oblige the organization that issued the loan to participate in the transfer of personal income tax.

This rule applies to an employing organization that has entered into a loan agreement with its employee. In this case, the legal entity determines the tax base, calculates the tax, deducts the required amount from the salary and transfers it to the budget.

To carry out such actions, the organization must have a notarized power of attorney.

If the borrower does not ensure that the employer participates in the transfer of tax, he is obliged to independently submit a declaration to the tax office at his place of residence.

The reporting deadline is April 30 of the year following the year in which the income was received. Material benefits from savings on interest are taxed at a rate of 35% (Article 224 of the Tax Code of the Russian Federation).

If the lending organization decides to fully or partially repay the borrower’s debt using its own funds, the received part of the loan is fully taken into account when calculating personal income tax.

Taxation of an organization occurs in a completely different way when it receives income from issuing a repayable loan to an individual.

In accordance with tax legislation (Article 250), all income from interest received is included in non-operating income and taken into account when determining the tax base for calculating income tax.

Insurance contributions to the Pension Fund are not paid from the interest received. This is due to the fact that the provision of a loan implies its repayment. The funds issued do not constitute a payment to the borrower.

Results

Material benefit is the income of an individual, subject to personal income tax in a special manner, using special tax rates.
Tax must be calculated on each last day of the month. This is done by the tax agent. He also transfers the tax to the budget or informs the taxpayer and tax authorities about the impossibility of withholding. You can find more complete information on the topic in ConsultantPlus. Free trial access to the system for 2 days.