Interest-free loan to an employee - tax consequences

Organizations and individual entrepreneurs legally have the opportunity to issue funds to their employees and other companies on the basis of a loan agreement. At the same time, the law does not limit the upper and lower thresholds of the interest rate for the borrower’s use of the funds received. Based on this, organizations have every right to give their employees money without charging an interest rate or by setting a minimum payment for the use of borrowed funds at their discretion. When applying for a loan to an employee, the organization must take into account all the nuances of the transaction.

Features of obtaining a loan

From the point of view of financial benefits and ease of registration, a cash loan from an organization is many times more attractive for an individual than the lengthy and complex process of obtaining a bank loan. Typically, the interest rate on such a loan is zero. In addition, there is no need to waste time collecting documentation.

In accounting, it is necessary to correctly reflect the allocation of a sum of money, the repayment by the borrower of obligations incurred and the tax consequences associated with this procedure.

Organizational requirements for employees

Each organization has its own rules and procedure for lending to its employees, since there is no clear regulation in the law.

In some companies, the allocation of borrowed funds to an employee is possible subject to a certain length of service. Other employers incentivize workers with small short-term loans almost from the first month (or even day) of employment or after the expiration of an agreed probationary period.

One of the important conditions for an organization to issue loans to its employees is a stable financial position.

When considering a request for borrowed funds, the following shall be taken into account:

• work experience and personal characteristics of the applicant (employee qualities, responsibility, benefit to the company);
• average monthly salary;
• availability of existing loans and debts in relevant institutions;
• the purpose for which the employee required the loan.

Considering that the potential borrower works in this organization, documents confirming the identity and income of an individual are not required to apply for a loan. All information about the borrower is already available in the organization’s accounting department and human resources department.

How to apply for a cash loan?

The application procedure is not complicated. The employee submits a written application addressed to the head of the organization. The manager reviews the appeal and makes a decision.

If the outcome of the case is positive, the organization issues a corresponding notification (instruction, order). The issuance of funds is carried out on the basis of a loan agreement. It contains the details of the parties and the conditions for issuing and repaying the loan.

The following can be used as a source of financing in such a situation:

• personal funds of the manager (or individual entrepreneur);
• part of the authorized, reserve or other fund of the organization;
• retained earnings.

In exceptional cases, when allocating a large sum for specific purposes stated in the application, the manager has the right to request an apartment plan, an agreement of intent for the purchase of real estate, a medical report, and so on.

What the law says

Citizens often have questions about whether an organization can issue borrowed funds to its employees. What does the law say?

Dear readers! The article talks about typical ways to resolve legal issues, but each case is individual. If you want to find out how to solve your particular problem , contact a consultant:

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According to the legislation of the Russian Federation, issuing funds as a loan to those in need is not a privilege exclusively of credit institutions, which is why nothing can prevent employers from helping their employees in resolving financial issues for a certain period of time.

The conditions for issuing credit from an employer may differ significantly from those provided by banking institutions or microfinance organizations. We are talking about a lower interest rate or its complete absence, about an increased loan term or about unlimited lending.

Note. A perpetual loan is a type of lending service characterized by flexible debt repayment terms. The borrower repays the borrowed funds based on the lender's requirements.

Thus, in accordance with established standards, there are no general requirements for the organization, its employees, terms and size of the loan. The deal involves flexible terms of cooperation.

Loan agreement

Internal loan operations for employees are regulated by Article 42 of the Civil Code. Actions to issue and receive funds are reflected in the loan agreement. In addition, it is allowed to attach a receipt or act of transfer of borrowed funds.

The contract must include:

• loan size;
• terms and scheme of debt repayment;
• the amount and procedure for paying interest (or lack thereof).

The loan agreement comes into force from the moment the borrowed funds are issued to the employee.

It is very important to indicate the interest rate. In the absence of fixed data, the amount of interest is determined based on the refinancing rate at the time of repayment of part or all of the loan amount. If there is no note in the contract about the gratuitous basis of providing monetary assistance to the employee, interest is automatically calculated.

Borrowed funds can be accrued by an organization only in national currency. If there is no specified repayment period, the loan is considered issued on demand. In this case, it is subject to repayment within a month from the date of request.

Important! The employee has the right to return the borrowed funds before the expiration of the repayment period, unless this contradicts the contract.

The amount of monetary assistance for employees of the organization is not limited. Loans of more than 600,000 rubles are subject to special control by the bank.

As part of debt repayment, payment can be made to a bank account or to the company's cash desk. The amount of debt based on the contract can also be withheld when calculating wages, but not more than 20% of it.

AGREEMENT No. loan (interest-free) with an employee

_________ “___”______________
_____________________, hereinafter referred to as the “Lender”, represented by ______________________, acting on the basis of _____________, on the one hand, and employee ___________________________________, working for the Lender in the position of __________________________, hereinafter referred to as the Borrower, on the other hand , have entered into this agreement as follows:

SUBJECT OF THE AGREEMENT

1.1. The Lender transfers to the Borrower the ownership of funds in the amount of _____________ (___________________) rubles (hereinafter referred to as the loan amount), and the Borrower undertakes to return the loan amount to the Lender by "__"__________.

No interest is charged for using the loan.

1.2. The loan is considered granted from the moment the loan amount is transferred to the Borrower and the acceptance certificate is signed between the parties.

1.3. The loan amount or the corresponding part is considered returned by the Borrower at the moment of depositing funds into the Lender's cash desk and receiving from him an identifying document (receipt, act) or at the time of transferring the corresponding amount to the Lender's bank account.

RIGHTS AND OBLIGATIONS OF THE PARTIES

2.1. The Lender is obliged to transfer the loan amount to the Borrower under the acceptance certificate within __________ business days from the date of signing this agreement.

2.2. The borrower is obliged to repay the received loan amount in equal installments - ____________ (_________________________) rubles monthly during ________________________, starting from _______________________ according to the following schedule:

2.3. The borrower has the right to repay the loan amount ahead of schedule.

2.4. If the Borrower violates the deadline established for repaying the next part of the loan, the Lender has the right to demand early repayment of the entire remaining loan amount.

2.5. The Borrower is obliged to repay the loan amount ahead of schedule in the event of termination of the employment contract with the Lender (employment contract No. __ dated _______), in this case the loan must be repaid within _______________ days (months) from the date of termination of the employment contract.

RESPONSIBILITY OF THE PARTIES

3.1. In the event of non-fulfillment or improper fulfillment of obligations by one of the parties under this agreement, the dishonest party is obliged to compensate the other party for losses caused by such non-fulfillment.

3.2. In case of failure to repay the loan amount or part thereof within the period stipulated by this agreement, the Borrower shall pay the Lender a penalty in the amount of ___% of the unreturned loan amount or part thereof for each day of delay.

3.3. The Lender is obliged to pay the Borrower a penalty in the amount of ____% of the loan amount for each day of delay if the Lender fails to comply with the conditions of clause 2.1. for reasons beyond the control of the Borrower.

FORCE MAJEURE

4.1. The parties are released from liability for partial or complete failure to fulfill obligations under this agreement if this failure was a consequence of force majeure circumstances that arose after the conclusion of this agreement as a result of extraordinary circumstances that the parties could not foresee or prevent.

4.2. The classification of certain circumstances as force majeure is carried out on the basis of business customs.

CONFIDENTIALITY

The terms of this agreement and additional agreements (protocols, etc.) to it are confidential and are not subject to disclosure.

DISPUTE RESOLUTION

6.1. All disputes and disagreements that may arise between the parties on issues that are not resolved in the text of this agreement will be resolved through negotiations on the basis of current legislation and business customs.

6.2. If controversial issues are not resolved during negotiations, disputes are resolved in court in the manner prescribed by current legislation.

7. TERM AND TERMINATION OF THE AGREEMENT

7.1. This agreement comes into force from the moment the Lender transfers the loan amount to the Borrower and ends after the parties fulfill their obligations in accordance with the terms of the agreement.

FINAL PROVISIONS

8.1. Any changes and additions to this agreement are valid provided that they are made in writing and duly signed by authorized representatives of the parties.

8.2. All notices and communications must be given in writing.

8.3. This agreement is drawn up in two copies having equal legal force, one copy for each of the parties.

Addresses and details of the parties

Signatures of the parties

Download the document “Loan Agreement (interest-free) with an employee”

Loan agreement without interest

Any transaction in this case is recorded in writing. In the agreement on issuing a loan on a gratuitous basis, this fact must be reflected. The absence of a clause on the gratuitous nature of financial assistance entails automatic accrual of interest.

The agreement must indicate:

• loan amount;
• repayment period;
• special purpose.

The agreement contains the following information:

• place and date of issuance of borrowed funds;
• name of the organization and full name of the head;
• personal information about the borrower;
• repayment scheme and terms, possibility of early repayment;
• ways to resolve disputes;
• document confidentiality clause;
• options for force majeure situations that release the parties to the transaction from their obligations under this agreement.

If the loan period is extended or other changes occur, this is stated in the additional agreement. The additional agreement document becomes part of the main loan agreement.

Taxation procedure for an employee on a loan from an organization

If a gratuitous loan agreement is concluded, the employer does not derive financial benefits from this transaction. Consequently, there is no basis for charging tax.

An employee who receives borrowed funds on an interest-free basis from his employer benefits from savings on interest payments. This entails taxation of the income thus obtained.

Upon issuance of an interest-free loan, the employer is obliged to perform the following operations:

• calculate personal income tax at the rate of 35% of the amount saved on interest during the entire borrowing period (monthly);
• withhold tax from the borrower's income, but not more than half of the salary;
• transfer personal income tax to the budget monthly.

The tax is calculated on the last day of the month, and the withheld amount is transferred to the budget on the next day after the calculation.

It is important to take into account those cases where tax is not charged. These include the following loans received for specific purposes:

• A cash loan received for the construction of a new home or the purchase of an apartment, house, share or room in a secondary building. The tax is not charged if the funds are used to purchase a plot of land for the subsequent construction of a residential building.
• The loan was received by the borrower in order to refinance a targeted loan taken for the purchase or construction of individual housing.

Tax consequences of a loan issued to an employee

A company that issues a loan to its employee or any other individual does not take into account the amount issued as its own expenses either for income tax or within the framework of the simplified tax system. Loan repayment is not tax income. The only thing that should be paid attention to in this regard is the possibility of interpreting such transactions as an element of microfinance activity.

The use of simplified taxation by such companies is prohibited, so systematic loans issued to third-party individuals may lead to the need to switch to a general taxation system. However, when it comes to one-time loans to employees of the company itself, problems usually do not arise.

For an employee who has received an interest-free loan, the tax situation is somewhat more complicated. A “free” loan or a loan at a low interest rate results in the recipient receiving material benefits from savings on interest. An individual is required to pay personal income tax at a rate of 35%. It is interesting that the lender, the organization that issued the funds, must calculate, withhold and pay tax on material benefits. The calculation of material benefits is made based on the results of each month during the loan period.

The calculated amount of personal income tax for material benefits can be withheld from any monetary income of the borrower, for example, from his salary. True, deductions should not exceed 50% of the salary itself. The amount of benefit from which tax is withheld is reflected in the annual 2-NDFL certificate with income code 2610.

If a given individual did not receive income subject to personal income tax in the reporting period, then he will simply have nothing to withhold tax from. In this case, such a situation is reported to the borrower himself, as well as to the tax office, for which a 2-NDFL certificate is also drawn up, but with report attribute “2”. This will mean that the tax agent was not able to withhold the tax, and that the individual is obliged to pay the budget independently. The deadline for submitting a certificate of income in this case is different: if in normal situations companies submit 2-NDFL before April 1 of the year following the reporting year, then the certificate of unwithheld tax must be submitted to the Federal Tax Service by March 1.

The tax calculation itself is carried out as follows. If the loan is interest-free, then the material benefit is calculated based on 2/3 of the Central Bank key rate in effect on the last day of the month. Based on the interest thus obtained, the daily interest is determined (by dividing by 365 or 366 days), after which the resulting value is multiplied by the number of days the loan was used during the month and the loan amount itself. If the loan was issued at a low interest rate, then the material benefit will be calculated using the same analogy, but from the difference between the loan rate and 2/3 of the key rate.

Thus, with the current key rate of 10% as of December 2021, it is advisable to issue a loan to an employee so that he does not have the obligation to pay personal income tax, with a rate on such a loan of at least 6.7%.

Material benefit

In fact, an employee receives a material benefit when receiving a cash loan from an employer in two situations:

• when receiving a loan without interest for the use of funds;
• when the interest rate on the loan is calculated less than 2/3 of the refinancing rate of the Central Bank of Russia.

In other cases, the employer automatically becomes a tax agent, whose responsibilities include the calculation and withholding of tax on material benefits.

Important! The tax amount is deducted from your salary every month. At the same time, for residents of the Russian Federation its size is 3%, for other persons the rate is determined at 30%.

Accounting

To account for settlements with employees on borrowed money, the Chart of Accounts provides for the opening of a separate sub-account to account 73 “Settlements with personnel for other transactions”.
When the accrual of interest and the issuance of a loan to an employee are reflected, entries are generated as a debit of the account. When returning funds - according to the account credit. A loan was issued to an employee: postings

In tax accounting, accrued interest is taken into account when calculating income tax as part of non-operating income (clause 6 of Article 250 of the Tax Code of the Russian Federation).

Income tax, insurance premiums, VAT

When calculating corporate income tax, issued and reimbursed loan funds are not subject to tax, since they are not profit.

When issuing an interest-bearing loan, the amount of interest payments received constitutes non-operating income. Insurance premiums are not charged on borrowed funds, and interest received is not subject to VAT.

Wiring

The issuance of borrowed funds to employees of the organization must be reflected in account 73-1 “Settlements on loans provided.”

All operations on borrowed funds are reflected:

• debit 73-1, credit 50 (51) issuance of borrowed funds;
• debit 73-1, credit 91-1 interest accrual;
• debit 51 (50), credit 73-1 repayment through the cash register or current account;
• debit 70, credit 68 withholding personal income tax from the benefits received by the employee.

Calculations and corresponding entries must be reflected in the accounting records every month.

How to apply for a loan to an employee of an organization (enterprise)

In order for a company to begin the process of drawing up an agreement and issuing funds to its employee, the second one is required to write an application.

Before writing your own application addressed to your employer, I advise you to familiarize yourself with a sample of this document - this will help reduce the time spent on writing.

There are times when a company provides an application form that you just have to fill out. One way or another, some documents will be required to conclude a loan agreement with an organization.

Although you will need a much smaller number of them than to apply for a bank loan for the same amount, this does not cancel them out at all.

When issuing a loan to an employee of an organization, the postings look like this:

Offers from financial institutions

There are different lending programs for employees of organizations:

Package of necessary documents

Most often, in order to obtain a loan from the organization in which you work, nothing else is required except a written application.

The employer can already obtain all the information about your income from the accounting department, but in the case when you ask for a fairly large loan amount, while working in some other place other than the one where you are asking for the loan, then you may need a 2-NDFL .

The fact that there is no need to collect a huge pile of certificates, statements from work, place of residence, and so on, is the most important advantage of lending to your organization.

You may also need documents that would confirm the purpose of your loan. Relevant only for a targeted type of loan.

How to apply for a loan without registration in your passport, see the article: loan without registration. Read about a loan in Moneta here.

The employer already has a copy of your passport, all the information about your income, place of residence and family composition, which is why an application for a loan at an enterprise is processed much faster than at a bank or microfinance company.

Requirements for the borrower

The first and most important requirement for the borrower is his or her majority.

The company has the right to choose who should issue a loan and who should not; formally, absolutely any employee can receive a loan; it is up to the lender to decide, since the law has no restrictions in this regard.

This means that the company can and has the right to put forward any of its requirements for issuing a loan.

Perhaps this will be the minimum length of service in the organization, the position that the potential borrower must hold, his age, and so on; the selection can be carried out according to a variety of criteria.

Further, it should be noted that the company can either agree to issue a loan or refuse. In most cases, actions develop according to the second option.

Since a loan from a company has the purpose of helping, motivating or rewarding a good employee who works almost perfectly.

It is also obvious that the company must have funds ready to provide.

Very often, interest-free loans are received by the founders of the enterprises themselves, who may not even be employees.

This plays a role only when the company’s rules include such a clause. The most common conditions of enterprises for issuing a loan were the following:

• experience at the enterprise must exceed 2-3 years;
• Borrower's age is over 35 years;
• the employer should not have any complaints about the work of the borrower, a certain position in a certain area of ​​the company.

If in recent months the employee has had administrative penalties, then most likely the loan application will be rejected or at least postponed, along with the tightening of the conditions under which the loan will be issued.

It may even be that the interest rate on the loan will be increased, or if it was not, then introduced.

If such a need arises, the company, like any lender, has the right to review the credit history of the potential borrower.

This is quite rarely done, since most likely, even if the debt is not repaid by the employee, it can be repaid using his salary.

Mechanism for concluding an agreement

In order to conclude a loan agreement with an organization, as in any other case, sufficient grounds are needed for this. A sample loan agreement is available.

The main basis for concluding such an agreement is a statement handwritten by the borrower to a potential lender, that is, the organization in which he works.

It is best to familiarize yourself with the sample in advance before drawing up your own application. There are also cases when an organization is ready to provide a pre-made form.

For a statement to be considered correct and have legal force, it must include the following points:

1. The details of the chief director of the company, his last name, first name, and patronymic must be written down.
2. The position in which the applicant works in this company, his last name, first name, patronymic.

These two points are written at the beginning of the statement, after which, in the middle, the word “Statement” is written.

Below, under this word, is the request of the potential borrower, addressed to the organization in which he works, to provide him with a loan, indicating the amount of the loan, the purpose for which the funds are taken.

At the very end, after this, the application is signed by the borrower and the date of writing is indicated.

Also, for it to be legal, it needs to be certified by the office. This is a mandatory aspect, without which it will not have legal force.

The loan agreement between an employee and an organization does not differ much from other loan agreements; it has the same form.

There are also cases when the document may contain some additional conditions, such as, for example, if a company employee is laid off or fired, he will be required to repay the entire amount of the debt at once.

Also, if an employee needs financial assistance from the company in the construction or purchase of housing, then it would be better if he indicates this in the agreement with the lender, since this fact will help reduce personal income tax payments.

This means reducing the waste of money. In different cases, the loan agreement can be formed in different ways, which means that there are no templates when filling out this document.

But, the following points must be specified:

• the period for which the loan is issued;
• the procedure by which the funds will be returned (one-time or gradually, with a payment schedule);
• for an interest-free loan, it is also necessary to indicate the absence of interest, otherwise the rate will be the refinancing rate of the Central Bank of the Russian Federation;
• the purpose for which finance is needed;
• provide for penalties in case of non-fulfillment of the borrower's obligations.

After the agreement is drawn up, it must be signed by both the lender and the borrower.

Taxation of the transaction

Issuing a loan to an employee of an organization is taxable. Most often, it will be necessary to pay a tax, which is 2/3 of the refinancing rate of the Central Bank of the Russian Federation. (Clause 1, Clause 1, Article No. 212 of the Tax Code of the Russian Federation).

The date of receipt of income from an interest-bearing loan is usually considered to be the day on which the interest was paid. (In accordance with paragraph 3 of paragraph 1 of Article No. 223 of the Tax Code of the Russian Federation.).

All funds lent must also be registered in tax accounting, since both the lender and the borrower can receive profit from this.

Is it possible to provide without interest?

Can an organization issue an interest-free loan to an employee? A loan to an employee from an organization can be provided without interest, but in this case this should be indicated in the loan agreement.

Such a transaction will not be subject to taxation, since it will not generate income for the parties to the loan.

Debt write-off (forgiveness)

In a situation where the head of an organization decides to forgive the amount of debt to his employee, he will need to perform a number of actions established by law:

1. First of all, the fact of debt forgiveness is documented in writing. This may be an agreement on donating funds to an employee of the organization, signed by the manager. Another documentation option is an official notification of forgiveness of the amount of borrowed funds.
2. In the current situation, the amount of forgiven debt constitutes a certain material benefit. According to current legislation, a tax of 13% is charged on it. The date of accrual of income tax is the day when the corresponding document is signed.
3. If the organization (or managers) decide not to withhold the debt from the employee, then the tax accrued on the amount of profit from the saved interest payments is withheld from the individual’s wages until full repayment.

As a result, the following are subject to taxation:

• amount of debt (forgiven);
• benefit from interest savings at the forgiveness date;
• income paid to an employee (personal income tax).

In this case, the total amount of taxes withheld cannot be more than half the monthly salary of an individual.

Taxation

This type of lending is quite beneficial for the employee from a financial point of view. Here there is a significant saving on the interest rate, which is described in detail in subsection. 1 clause 1 art. 212 of the Tax Code of the Russian Federation.

If an employee receives an interest-free loan from his employer, then the tax agent is the company that processed the loan.

The amount of tax is calculated by tax officers on an accrual basis from the very beginning of the tax period at the end of each month. The agent must display the amount of tax already delayed in the previous tax period.

Tax agents must withhold the accrued amount of tax only from the employee’s income, including their salary, when they are actually paid. However, this amount should not exceed 50% of the amount of payments.

When the law prohibits a taxpayer from receiving a designated property deduction, even if it was already made a little earlier, his income, provided in the form of material benefit, on the basis of Art. Art. 224 of the Tax Code of the Russian Federation, must be taxed at a rate of 35%.

If the purpose of receiving money was not new construction or the purchase of real estate, a rate of 34% is taken into account. The base subject to personal income tax at an inflated rate is prohibited from being reduced by tax deductions. This is described in detail in paragraph 4 of Art. 210 Tax Code of the Russian Federation.

If the employee’s income is expressed in foreign currency, the money is converted into rubles using the regulations of the Central Bank of Russia.