How to draw up a loan agreement between legal entities?

Can an interest-free loan be issued to another organization?

Yes, this possibility is provided for by the Civil Code.
According to Art. 808 of the Civil Code of the Russian Federation, a loan agreement between legal entities must be concluded on paper. It is also necessary to state that there is no interest on a cash loan, since otherwise, by default, the loan fee should be calculated based on the refinancing rate on the date of repayment of the loan or part thereof (clause 1 of Article 809 of the Civil Code of the Russian Federation). If the subject of the agreement is things, then such an agreement will be considered interest-free if there is no mention of this condition in it. When completing such transactions, the accountant is faced with the question of the tax consequences of an interest-free loan between legal entities. This is discussed in the next section, where we only talk about agreements between companies independent of each other, those that do not fall under the terms of Art. 105.1 Tax Code of the Russian Federation.

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Differences between a loan agreement and a receipt

A receipt is a more common form of securing debt obligations between parties. According to this document, one party transfers money to the other.

A receipt is a simplified form of a loan agreement, and a loan agreement is an expanded version of a receipt. The receipt contains an indication only of the loan amount and repayment terms, while the contract includes a wider range of information.

If a conflict situation arises between the parties and if the recipient fails to return the entire amount to the lender, the chances of collecting the debt under the loan agreement will be greater than under the receipt.

Despite all the differences, the loan agreement and the receipt do not exclude, but complement each other.

What to do if the receipt is not returned after repaying the debt

Tax risks of interest-free loans between independent organizations

If the lender has received loans or borrowings on which he pays interest, then the tax authorities may consider it unlawful to accept such interest as expenses, since the funds received from the loan were used to issue an interest-free loan. It is advisable to challenge such decisions of tax authorities in court, proving that the loan was used for other purposes, and the interest-free loan was issued from one’s own funds. Examples: the resolution of the Federal Antimonopoly Service of the North-Western District dated July 1, 2015 No. F07-3688/15 is not in favor of the taxpayer, a positive decision in the resolution of the Federal Antimonopoly Service of the Ural District dated January 14, 2009 No. F09-10027/08-C3.

Can additional income be accrued to the lender by calculating it from the market rate on loans? For independent entities, the Tax Code of the Russian Federation does not contain rules obliging the accrual of abstract income on interest-free loans between legal entities, so the loan provider should not have any problems (letter of the Ministry of Finance of the Russian Federation dated August 11, 2011 No. 03-03-06/2/120).

Do tax authorities have the right to accrue additional income from a borrower-legal entity by analogy with the material benefit from a loan without interest? In the Tax Code of the Russian Federation, for income tax purposes, there is no concept of material benefit from an interest-free loan between legal entities. The Ministry of Finance also comments on the illegality of such additional charges, for example, in letter dated March 23, 2017 No. 03-03-RZ/16846. The tax authorities do not argue with this approach (letter from the Federal Tax Service of Russia for Moscow dated November 22, 2011 No. 16-15/ [email protected] ). But an interest-free loan between a legal entity and an individual, including individual entrepreneurs, has its own tax nuances within the framework of calculating personal income tax on material benefits.

Read about this in our article “How material benefits are taxed with personal income tax (rate).”

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Borrower – individual

If the borrower is not a company, but an individual (for example, an employee of the lending organization), then he may have income in the form of material benefits from savings on interest, subject to personal income tax. Why can it? Yes, because it all depends on the purpose for which the loan is issued. If a loan is issued for the purchase (construction) of housing or land, then provided that the tax inspectorate confirms the right of the citizen-borrower to use the property tax deduction, the material benefit is exempt from taxation (paragraph 5, paragraph 1, paragraph 1, Article 212 of the Tax Code of the Russian Federation ).

Since when issuing an interest-free loan to a citizen, personal income tax is paid by the lending organization as a tax agent, it is to it that the “physician” must provide the appropriate confirmation. A document confirming the right to a property tax deduction may be:

notification in the form approved by order of the Federal Tax Service of Russia dated January 14, 2015 No. ММВ-7-11/3, issued by the tax office for submission to the employer (tax agent);
a certificate in the form given in letter No. BS-4-11/329 dated January 15, 2016, which can be issued by the tax office for presentation to other tax agents (other than employers).

In this case, the document must contain details of the loan agreement, on the basis of which the funds spent on the purchase of real estate, in respect of which a property deduction was provided, were provided. In the absence of relevant details, such a document cannot be the basis for tax exemption. This conclusion was made, in particular, in the letter of the Ministry of Finance of the Russian Federation dated September 21, 2016 No. 03-04-07/55231. It also states that a one-time submission of a supporting document is sufficient, that is, it is not necessary to submit a notification (certificate) annually in order to be exempt from personal income tax in subsequent years when repaying the issued loan.

But if the supporting document is issued not to the borrower directly, but to the spouse, then the exemption from personal income tax can no longer be applied. Officials from the Federal Tax Service of Russia drew attention to this in their letter dated June 23, 2016 No. BS-4-11/1120.

Now let’s talk about how to determine income in the form of material benefits from saving on interest. From 2021, such income is determined on the last day of each month in which the loan (credit) agreement was valid, regardless of the date of receipt of such a loan (clause 7, clause 1, article 223 of the Tax Code of the Russian Federation). The income itself is calculated based on 2/3 of the Bank of Russia refinancing rate established on the date of receipt of income (clause 1, clause 2, article 212 of the Tax Code of the Russian Federation). In this case, personal income tax is calculated at a rate of 35 percent (clause 2 of Article 224 of the Tax Code of the Russian Federation).

If the borrower has cash income from which tax can be withheld (for example, salary), then no questions arise. If there is no such income, for example, if the loan was issued to a citizen who is not an employee, then there is no way to withhold tax. This means that the lender is limited to submitting a message to the Federal Tax Service about the impossibility of withholding tax. The message is submitted in the form of a 2-NDFL certificate indicating code “2” in the “Sign” field. In this case, the procedure for filling out a certificate with attribute “2” is similar to the procedure for filling out a certificate with attribute “1”. However, in section 3 “Income taxed at the rate of __%” you need to indicate only those incomes from which tax was not withheld.

Interest-free loan between a legal entity and an individual

A transaction where an interest-free loan is given by an independent individual to an organization will not entail an increase in the tax burden on any of the parties to the transaction. Interest-free loans between an individual and a legal entity, including if the loan is provided by an individual entrepreneur, do not increase the taxable income of the borrower (see explanatory letters from government agencies from the previous section). For individuals, the Tax Code of the Russian Federation also does not contain any grounds for additional accrual of lost income.

In addition, the amount of the loan issued or repaid cannot be recognized as income for any party in accordance with subparagraph. 10 p. 1 art. 251 Tax Code of the Russian Federation. This is confirmed by court decisions, for example, resolution of the Federal Antimonopoly Service of the Ural District dated January 14, 2009 No. F09-10027/08-S3. The same applies to expenses: the amount of a loan issued or repaid is not an expense (Clause 12, Article 270 of the Tax Code of the Russian Federation).

The procedure for preparing a gratuitous loan agreement

A loan agreement between individuals (as opposed to legal entities) is considered concluded only at the moment of transfer of the loan and other subject of the contractual relationship, and not from the moment of signing. Confirmation that the agreement has been concluded is a receipt confirming the fact of transfer and receipt of money.

Under the loan agreement, it is allowed to transfer not only rubles, but also currency, subject to compliance with the provisions of Art. 140, 141 Civil Code.

The essential terms of the agreement are the subject - this is a certain amount of money, things and valuables transferred as the object of the loan. The content of the agreement is determined by the mutual obligations and rights of the parties to the signed agreement. But in fact, only the borrower has obligations under the agreement, that is, he must repay the loan amount within the established time frame (based on Article 810 of the Civil Code). The lender or creditor may require the borrower to return the loan item, as well as interest and penalties.

If the borrower is late in fulfilling his obligations, then a penalty may be demanded from him (under Article 330 of the Civil Code). The lender is relieved of the obligation to prove the fact of causing losses. The penalty can be accrued on the terms of the contract or according to the rules of the Civil Code (Article 332 of the Civil Code).

Classification of contracts

Loan agreements can be classified on various grounds:

According to the status of the parties. Loan agreement between individuals, between an individual and a legal entity (IP), between legal entities.
According to the form of the contract: oral and written form.
According to the availability of interest: free and with interest.

Peculiarities

When signing a gratuitous loan agreement, it is worth keeping in mind the following features:

If the borrower refuses to voluntarily repay the loan, the lender has the right to collect it in court. Additionally, this right does not need to be specified; it is guaranteed to the lender according to the law.
The borrower has the right to return the received amount of money ahead of schedule without the consent of the lender, but the agreement may establish a different procedure.
Changing the terms of the contract is possible, but only with the consent of both parties. To consolidate the changes, the parties sign an additional agreement.
In contracts for the provision of a gratuitous loan agreement up to 100 thousand rubles. You can not indicate anything about the calculation of interest and this will make the loan free of charge. In contracts worth more than 100 thousand rubles. it must be stated that no interest is accrued on the loan amount, otherwise the lender has the right to charge an interest rate on the amount of the debt in the amount of the key rate.

Is notarization required?

There is no legislative requirement for mandatory certification of the loan agreement and promissory note. The parties will have to decide for themselves whether they will contact a notary. Notarization will confirm that the parties are legally capable, sign the agreement of their own free will and are aware of the consequences of their actions.

If the gratuitous loan agreement is certified by a notary, then it is drawn up in triplicate. One of them remains in the custody of the notary, and if the document is stolen, you can always request a duplicate from the notary.

It is also possible to transfer funds with the participation of a notary. If necessary, he will be able to confirm this fact in court.

Contract structure

The gratuitous loan agreement assumes the following structure and content:

The name of the document, its number, place and date of conclusion of the agreement.
Indication of the creditor and lender: full name, passport details, residential address.
Indication of the borrower: full name, passport details, residential address.
The loan amount in numerical and written format.
The obligation of a borrower to repay the same amount of money within a specified time frame.
An indication that the loan agreement is interest-free.
Loan repayment terms (it is advisable to indicate a specific date).
Information on the procedure for calculating penalties (if desired) or increased interest for late payments. The lender himself decides which method of calculating sanctions to choose. For example, penalties for each day of delay in the amount of 1/150 of the refinancing rate or no more than 100% of the loan amount.
An indication of the method of securing the loan or collateral is allowed. This can be any valuable item from the borrower’s property, including real estate.
Signatures of the parties.

The fact of transfer of funds under the agreement is confirmed by a receipt. A sample gratuitous loan agreement can be viewed here.

The loan agreement is drawn up in two copies, one for each party.

Invalidation of the contract

Based on Art. 812 of the Civil Code, the borrower has the right to challenge the loan agreement or promissory note and demand that the court declare them invalid. The following facts may be the basis for this:

The fact of transfer of money from the lender to the borrower was not recorded anywhere - neither in the loan agreement, nor in the promissory note, or an act of acceptance and transfer of money was not drawn up.
The agreement is not in writing, although the loan amount exceeds 10 thousand rubles.
The signed gratuitous loan agreement contains gross errors in the details, for example, when indicating passport data.
One of the parties was incapacitated at the time of transfer of funds.
The loan agreement was signed under the influence of threats, deception, violence or fraudulent schemes.
The money under the agreement was not transferred in full.

It is unacceptable to challenge a loan agreement in writing in court on the basis of witness testimony (unless we are talking about collection through threats, violence, etc.).

Tax consequences of interest-free loans between related parties

If a transaction with an interest-free loan is carried out between organizations that are interdependent, then additional tax consequences arise in connection with Section V of the Tax Code of the Russian Federation.

Find criteria for interdependence here.

If the parties to a transaction are interdependent, the next step is to determine whether the transaction is controlled.

Our article “Criteria for controlled transactions - table” will help with this.

If the transaction does not fall under the criteria of a controlled one, and the parties to the transaction are Russian organizations or citizens, then they do not bear additional tax risks. If one of the interdependent parties is a foreign entity, then such a transaction automatically falls under the controlled ones (Article 105.14 of the Tax Code of the Russian Federation, letter of the Ministry of Finance of the Russian Federation dated September 4, 2015 No. 03-01-11/51070), and for this option - the next section of the article.

ATTENTION! As of 01/01/2017, a new tax rule is in effect. If a transaction involving an interest-free loan is carried out between interdependent legal entities that are registered on the territory of the Russian Federation, or with the participation of citizens of the Russian Federation, then it is not recognized as controlled (subclause 7, clause 4, article 105.14 of the Tax Code of the Russian Federation).

This means that the lender is now safe from additional income in the form of interest at the market rate. In the letter of the Ministry of Finance dated 04/21/2017 No. 03-12-11/1/24048, it is commented that the innovation is also valid for contracts concluded earlier than 01/01/2017, the main thing is that income and expenses on it are recognized after 01/01/2017.

Tax consequences of a loan between legal entities

Loans can be interest-bearing or interest-free. A borrower who takes out a loan at interest pays back the debt and pays for the use of the money. There is no fee for an interest-free loan, but there is taxation of a loan between legal entities in any case.

Interest-bearing loan. If the lender makes a loan with interest, he receives income. The company pays tax on income - from 6% to 20%, depending on the form of taxation.

Interest-free loan. A loan without interest is subject to income tax. A company that uses other people's money for free receives a benefit - according to the law, it is equal to 5% of the amount owed. The tax on material benefits is 35% monthly as long as the term of the loan from a legal entity to a legal entity is valid.

If the business owner borrowed 100,000 rubles, the material benefit is 5,000 rubles, and the monthly tax is 1,750 rubles. In a year, 21,000 rubles accrue, as if the entrepreneur took out a loan at 21% per annum. In order not to overpay, you should take out an interest-bearing loan at 5% per annum or more - in this case there is no material benefit.

Choose a bank

An interest-free loan between legal entities has tax consequences if the amount exceeds 1 billion rubles and the parties are interdependent. By law, two companies are considered interdependent if one owns 25% or more of the other. The state believes that the lender could make a profit if it invested this billion, and if there is a profit, it must pay tax on it.

Tax consequences of interest-free loans in a controlled transaction

If the issued interest-free loan relates to a controlled transaction, for example, one of the parties is not a resident of the Russian Federation, then Art. 269 of the Tax Code of the Russian Federation. When calculating income tax, the lender must take into account income in the form of unearned interest. To calculate the amount of interest, it is necessary to take into account the requirements of clauses 1.1, 1.2 of Art. 269 of the Tax Code of the Russian Federation. The actual interest rate (FP) on the loan must be compared with the established interval (see table below).

Type of loan	Interval
In rubles (place of registration, residence, tax residence of the parties - Russian Federation)	MIN = 0%, MAX = 180% of the refinancing rate of the Central Bank of the Russian Federation (for 2015), MIN = 75% to MAX = 125% of the key rate of the Central Bank of the Russian Federation (starting from 01/01/2016)
Other loans in rubles	MIN = 75%, MAX = 180% of the refinancing rate of the Central Bank of the Russian Federation (for 2015), MIN = 75% to MAX = 125% of the key rate of the Central Bank of the Russian Federation (starting from 01/01/2016)
In euros (in Chinese yuan, in pounds sterling)	MIN = EURIBOR (SHIBOR, LIBOR) + 4%, MAX = EURIBOR (SHIBOR, LIBOR) + 7%
In Swiss francs or Japanese yen	MIN = LIBOR + 2%, MAX = LIBOR + 5%
In other currencies	MIN = LIBOR (in dollars) + 4%, MAX = LIBOR (in dollars) + 7%

The lender can recognize actual income on the loan if FP>MIN. The borrower may recognize the actual loan expense if FP<MAX. For an interest-free loan, the FI is equal to 0, therefore, we calculate taxable income at the minimum interval rate (MIN), the expense on the received interest-free loan will be equal to 0.

About the risks associated with providing interest-free loans within a group of companies

Answer In accordance with paragraph 1 of Article 807 of the Civil Code of the Russian Federation, under a loan agreement, one party (the lender) transfers or undertakes to transfer into the ownership of the other party (borrower) money, things defined by generic characteristics, or securities, and the borrower undertakes to return the same amount of money to the lender (loan amount) or an equal number of things received by him of the same kind and quality or the same securities.

Unless otherwise provided by law or the loan agreement, the lender has the right to receive interest from the borrower for using the loan in the amount and in the manner specified in the agreement. If the agreement does not contain a condition on the amount of interest for using the loan, its amount is determined by the key rate of the Bank of Russia in force during the relevant periods (clause 1 of Article 809 of the Civil Code of the Russian Federation).

Paragraphs 2 and 3 of Article 809 of the Civil Code of the Russian Federation establish that, in the absence of another agreement, interest is paid monthly until the day the loan amount is repaid.

The loan agreement is assumed to be interest-free, unless it expressly provides otherwise, in cases where:

- an agreement is concluded between citizens for an amount not exceeding fifty times the minimum wage established by law, and is not related to the implementation of entrepreneurial activities by at least one of the parties;

- under the agreement, the borrower is not given money, but other things defined by generic characteristics.

Thus, the norms of civil legislation directly provide for the possibility of providing both interest-bearing and interest-free loans between commercial organizations. In this case, the amount of interest can be determined by agreement of the parties.

In accordance with paragraph 6 of Article 250 of the Tax Code of the Russian Federation, non-operating income of a taxpayer is recognized, in particular, income in the form of interest received under loan agreements, credit, bank account, bank deposit, as well as on securities and other debt obligations[1]

Subparagraph 2 of paragraph 1 of Article 265 of the Tax Code of the Russian Federation establishes that non-operating expenses include, in particular, expenses in the form of interest on debt obligations of any type, including interest accrued on securities and other obligations issued (issued) by the taxpayer, taking into account the specifics provided for in Article 269 of the Tax Code of the Russian Federation

[2], as well as interest paid in connection with the restructuring of debts on taxes and fees in accordance with the procedure established by the Government of the Russian Federation.

In this case, interest on debt obligations of any type is recognized as an expense, regardless of the nature of the credit or loan provided (current and (or) investment). An expense is recognized only as the amount of interest accrued for the actual time of use of borrowed funds (the actual time the said securities are held by third parties) and the initial yield established by the issuer (lender) in the terms of the issue (issue, agreement), but not higher than the actual one.

Consequently, in the general case, interest on a loan for profit tax purposes is subject to accounting as part of non-operating income (expenses) of the taxpayer (lender) (borrower), taking into account the provisions of Article 269 of the Tax Code of the Russian Federation.

In accordance with paragraph 1 of Article 269 of the Tax Code of the Russian Federation, for the purposes of this chapter, debt obligations mean loans, commodity and commercial loans, loans, bank deposits, bank accounts or other borrowings, regardless of the method of their execution.

For debt obligations of any type, income (expense) is interest calculated on the basis of the actual rate, unless otherwise established by this article.

For debt obligations of any kind arising as a result of transactions recognized

in accordance with this Code
in controlled transactions
,
income (expense) is recognized as interest calculated on the basis of the actual rate, taking into account the provisions of Section V.1 of this Code
, unless otherwise established by this article.

Accordingly, income (expenses) in the form of interest on a loan are recognized when determining the tax base for income tax based on the actual rate, with the exception of interest arising from transactions recognized as controlled.

The concept of a controlled transaction is established in Article 105.14 of the Tax Code of the Russian Federation.

According to paragraph 1 of Article 105.14 of the Tax Code of the Russian Federation, for the purposes of this Code, controlled transactions are transactions between related parties (taking into account the specifics provided for in this article).

The specifics of recognizing transactions as controlled are established by paragraphs 1–3 of Article 105.14 of the Tax Code of the Russian Federation.

At the same time, in accordance with subparagraph 7 of paragraph 4 of Article 105.14 of the Tax Code of the Russian Federation, regardless

depending on whether the transactions satisfy the conditions provided for in paragraphs 1 - 3 of this article,
transactions for the provision of interest-free loans between interdependent persons, the place of registration or place of residence
of all parties and beneficiaries for which is the Russian Federation, are not recognized as controlled.

Thus, the legislation directly establishes that transactions for the provision of interest-free loans between interdependent persons, the place of registration or place of residence of all parties and beneficiaries for which is the Russian Federation, are not recognized as controlled

Taking into account the above, in the event of a transaction to provide an interest-free loan that is not controlled, interest is recognized as income (expense) based on the actual rate.

Consequently, if the loan rate is set at 0 percent, then there is no income (expense) in the form of interest on such a debt obligation.

This position is also shared by regulatory authorities. Thus, in the letter of the Federal Tax Service of the Russian Federation dated February 15, 2018 No. SD-4-3 / [email protected] the following explanations were given:

“The specifics of accounting for interest on debt obligations for tax purposes are established by Article 269 of the Tax Code of the Russian Federation (hereinafter referred to as the Code).

According to paragraph 1 of Article 269 of the Code, for debt obligations of any type, income (expense) is interest calculated based on the actual rate, unless otherwise established by the said article of the Code.

The procedure for recognizing as income interest on debt obligations of any type arising as a result of transactions recognized as controlled transactions in accordance with the Code is set out in paragraph three of paragraph 1 and in paragraph 1.1 of Article 269 of the Code.

From January 1, 2021, in accordance with subparagraph 7 of paragraph 4 of Article 105.14 of the Code, transactions for the provision of interest-free loans between interdependent persons, the place of registration or place of residence of all parties and beneficiaries for which is the Russian Federation, are not recognized as controlled.

Thus, in the event of a transaction to provide an interest-free loan (based on a 0 percent rate) that is not recognized as controlled in accordance with the Code, the provisions of paragraph three of paragraph 1 and paragraph 1.1 of Article 269 of the Code do not apply. Accordingly, on these transactions, interest is recognized as income in accordance with paragraph two of paragraph 1 of Article 269 of the Code, that is, based on the actual rate. If the loan rate is set at 0 percent, then there is no interest income on such a debt obligation.

As for the accounting for taxation of profits of other income received during transactions for the provision of interest-free loans between interdependent business companies, then, in the opinion of the Federal Tax Service of Russia, the issue of their taxation can be considered based on the economic essence of the said income, the order and conditions of their occurrence.”

The letter of the Ministry of Finance of the Russian Federation dated March 23, 2017 No. 03-03-RZ/16846 made the following conclusions:

“Clause 1 of Article 269 of the Tax Code of the Russian Federation (hereinafter referred to as the Code) establishes that for debt obligations of any type, income (expense) is interest calculated based on the actual rate, unless otherwise established by Article 269 of the Code.

For debt obligations of any type arising as a result of transactions recognized as controlled transactions in accordance with this Code, income (expense) is recognized as interest calculated based on the actual rate taking into account the provisions of Section V.1 of the Code, unless otherwise established by Article 269 of the Code (paragraph third paragraph 1 of Article 269 of the Code).

Thus, according to paragraphs one through three of paragraph 1.1 of Article 269 of the Code, for a debt obligation arising as a result of a transaction recognized as a controlled transaction in accordance with the Code, the taxpayer has the right:

recognize as income interest calculated on the basis of the actual rate on such debt obligations, if this rate exceeds the minimum value of the interval of limit values established by paragraph 1.2 of Article 269 of the Code;

recognize as an expense interest calculated on the basis of the actual rate on such debt obligations, if this rate is less than the maximum value of the interval of limit values established by paragraph 1.2 of Article 269 of the Code.

If the conditions established by paragraphs one through three of clause 1.1 of Article 269 of the Code are not met, for debt obligations arising as a result of transactions recognized as controlled transactions in accordance with the Code, interest calculated on the basis of the actual rate taking into account the provisions of Section V is recognized as income (expense). 1 of the Code.

It should be noted that from 01.01.2017, transactions for the provision of interest-free loans between related parties, the place of registration or place of residence of all parties and beneficiaries in which is the Russian Federation, regardless of whether such transactions satisfy the conditions provided for in paragraphs 1 - 3 of Article 105.14 Code are not recognized as controlled (subclause 7 of clause 4 of Article 105.14 of the Code).

Thus, in the event of a transaction to provide (receive) an interest-free loan (based on a 0 percent rate) that is not recognized as controlled in accordance with the Code, the provisions of paragraph three of paragraph 1 and paragraph 1.1 of Article 269 of the Code do not apply.

As for income from interest-free use of borrowed funds, it should be noted that in accordance with Article 41 of the Code, income is recognized as economic benefit in monetary or in-kind form, taken into account if it is possible to evaluate it and to the extent that such benefit can be assessed, and determined in accordance with the chapters “Tax on personal income”, “Tax on corporate income” of the Code.

The procedure for determining material benefit and its assessment when receiving an interest-free loan is not established in Chapter 25 “Organizational Income Tax” of the Code.

Consequently, the material benefit received by an organization from the interest-free use of borrowed funds does not increase the tax base for corporate income tax

».

At the same time, I would like to draw your attention to the following.

On August 19, 2021, Article 54.1 of the Tax Code of the Russian Federation “Limits for the exercise of rights to calculate the tax base and (or) the amount of taxes, fees, and insurance contributions” came into force.

According to paragraph 1 of Article 54.1 of the Tax Code of the Russian Federation, a taxpayer is not allowed to reduce the tax base and (or) the amount of tax payable as a result of distortion of information about the facts of economic life (the totality of such facts), about objects of taxation that are subject to reflection in tax and (or) accounting or tax reporting of the taxpayer.

Consequently, by virtue of the norm of paragraph 1 of Article 54.1 of the Tax Code of the Russian Federation, it is unacceptable to use a taxation scheme that is created for the sole purpose of obtaining an unjustified tax benefit.

In this case, the tax authorities need to obtain evidence of the taxpayer’s deliberate actions aimed at non-payment of taxes to the budget.

Let us note that the deliberate actions of the taxpayer are evidenced by such a combination of factors as the interdependence of the parties to the transaction, the coordination of the actions of the parties to the transaction aimed at non-payment of tax to the budget, the implementation of transit operations, special forms of payment, the creation of artificial document flow, etc.

Taking into account the foregoing, we can conclude that if the tax authorities identify a set of factors indicating deliberate actions of the taxpayer, discrediting the business purpose of the transaction and aimed solely at minimizing tax obligations payable to the budget, then the tax authorities will as a result of such actions, are adjusted in full.

According to paragraph 2 of Article 54.1 of the Tax Code of the Russian Federation, in the absence of the circumstances provided for in paragraph 1 of this article, for transactions (operations) that have taken place, the taxpayer has the right to reduce the tax base and (or) the amount of tax payable in accordance with the rules of the corresponding chapter of part two of the Tax Code of the Russian Federation, subject to simultaneously following conditions:

1) the main purpose of the transaction (operation) is not non-payment (incomplete payment) and (or) offset (refund) of the tax amount;

2) the obligation under the transaction (operation) was fulfilled by a person who is a party to the agreement concluded with the taxpayer, and (or) a person to whom the obligation to perform the transaction (operation) was transferred under the agreement or law.

It should be noted that at the moment, arbitration practice based on the norms of Article 54.1 of the Tax Code of the Russian Federation has not been formed. In this connection, it is not possible to assume the tax authority’s reasoning when considering such cases.

At the same time, in our opinion, in this case, the approach used in arbitration cases concerning the receipt of unjustified tax benefits, based on the provisions of the Resolution of the Plenum of the Supreme Arbitration Court of October 12, 2006 No. 53 (hereinafter referred to as Resolution No. 53), may be applicable.

In Resolution No. 53 of the Supreme Arbitration Court of the Russian Federation, justifying its explanations by the need to ensure uniformity of judicial practice when arbitration courts evaluate evidence of the validity of the occurrence of a tax benefit for a taxpayer, he indicated that a tax benefit cannot be considered as an independent business goal. Therefore, if the court establishes that the main goal pursued by the taxpayer was to obtain income solely or primarily through tax benefits in the absence of an intention to carry out real economic activity, recognition of the validity of its receipt may be refused.

For the purposes of Resolution No. 53, a tax benefit is understood as a reduction in the amount of tax liability due to a reduction in the tax base, receiving a tax deduction, tax benefit, applying a lower tax rate, as well as obtaining the right to a refund (offset) or reimbursement of tax from the budget.

A tax benefit may be considered unjustified, in particular, in cases where, for tax purposes, transactions are taken into account not in accordance with their actual economic meaning or transactions are taken into account that are not due to reasonable economic or other reasons (business purposes) (clause 3).

Also, paragraph 4 of Resolution No. 53 provides that a tax benefit cannot be recognized as justified if received by the taxpayer outside of connection with the implementation of real business or other economic activity.

Paragraph 6 of Decree No. 53 states the following:

“Courts must keep in mind that the following circumstances in themselves cannot serve as a basis for deeming a tax benefit unjustified:

— creation of an organization shortly before a business transaction;

— interdependence of participants in transactions;

— irregular nature of business operations;

— violation of tax laws in the past;

— one-time nature of the operation;

— carrying out the transaction at a location other than the taxpayer’s location;

— making payments using one bank;

— making transit payments between participants in interrelated business transactions;

— the use of intermediaries in carrying out business transactions.

However, these circumstances, taken together and in conjunction with other circumstances, in particular those specified in paragraph 5 of this Resolution, may be recognized as circumstances indicating that the taxpayer has received an unjustified tax benefit.”

In relation to the case we are considering, transactions involving the conclusion of loan agreements on a gratuitous basis do not indicate that taxpayers have received an unjustified tax benefit.

At the same time, if the funds issued on an interest-free basis were received by the lender organization under interest-bearing loan agreements from third parties, the lender organization may have a risk

filing claims from the tax authorities
regarding the unreasonableness of expenses in the form of interest on a loan raised by the organization as a lender from third parties
.

The position of the tax authorities may be based, for example, on the fact that an organization that received an interest-bearing loan and issued an interest-free loan is profitable, and an organization that received an interest-free loan is unprofitable.

Consequently, the interest-bearing loan was purposefully issued to a profitable company in order to reduce its income tax base.

Thus, in the Ruling of the Supreme Court of the Russian Federation dated January 30, 2015. No. 305-KG14-3233 states:

“The basis for the decision in the contested part was the conclusion of the tax authority that the reason for the loss was
the excess of the interest paid
by the company to third parties
over the interest paid to the company
by third parties under loan and credit agreements
.
According to the tax authority, these actions of the company in obtaining and issuing loans to third parties are aimed at obtaining unjustified tax benefits. When considering the case, the courts, having studied the evidence fully and comprehensively presented in the case materials, evaluating them in their entirety and interrelationships, found that the company’s actions to attract borrowed funds and co-investment, carried out with interdependent organizations, are devoid of economic content and are aimed at creating conditions for obtaining unjustified tax benefit in the form of a loss that reduces taxable profit

Taking into account the established circumstances, the courts, guided by the provisions of Articles 252, 265 of the Tax Code of the Russian Federation, the explanations set out in the Resolution of the Plenum of the Supreme Arbitration Court of the Russian Federation dated October 12, 2006 No. 53 “On the assessment by arbitration courts of the validity of the taxpayer receiving a tax benefit”, came to the conclusion that whether the inspectorate has legal grounds to reduce the loss for 2011 received by the company.”

In the Ruling of the Supreme Court of the Russian Federation dated 08/09/17 No. 305-ES17-9969 in case No. A40-251161/2015, the court indicated that the taxpayer provided a deferment to its customers for up to 6 months and thereby artificially created a shortage of working capital

.
Thus, the costs incurred by the taxpayer in the form of interest on loans, the attraction of which did not have a reasonable business purpose, are not economically justified
(Article 252 of the Tax Code of the Russian Federation).

Previously, judicial practice was in favor of both the tax authorities and taxpayers:

- negative practice - Resolutions of the Federal Antimonopoly Service of the Moscow District dated November 16, 2011 in case No. A40-1037/11-99-5[3], Arbitration Court of the Moscow District dated April 20, 2017

No. F05-4505/2017 in case No. A40-251161/15-20-2117, Ninth Arbitration Court of Appeal
dated 01/19/17
No. 09AP-61658/2016 in case No. A40-251161/15, FAS Volga-Vyatka District dated 11.03. 11 No. A28-5351/2010, Federal Antimonopoly Service of the Volga Region dated 08/04/2011. No. A12-22102/2010, FAS Moscow District dated November 16, 2007 No. KA-A40/11648-07;

- positive practice is less numerous - Resolutions of the Federal Antimonopoly Service of the North-Western District dated July 2, 2008 No. A05-6193/2007, FAS Volga District dated December 16, 2008 No. A12-9039/2008, dated December 5, 2008 No. A12-3509/08, Federal Antimonopoly Service of the Ural District dated January 19, 2011 No. F09-11444/10-S3, FAS Moscow District dated December 23, 2010 No. KA-A40/15995-10.

The courts supported those taxpayers who were able to prove that issuing a loan at a lower interest rate would bring them an economic benefit. Otherwise, the lack of economic justification for a loss-making transaction will lead to tax risks

(Resolution of the Federal Antimonopoly Service dated 04.08.11 No. A12-22102/2010, Resolution of the Federal Antimonopoly Service of Moscow dated 16.11.07 No. KA-A40/11648-07).

Based on the foregoing, we believe that if the funds issued to an interdependent company on an interest-free basis were received by the lending organization under interest-bearing loan agreements from third parties, we cannot exclude the risk of claims from the tax authorities regarding the unreasonableness of expenses in in the form of interest on a loan raised by the organization as a lender from third parties.

College of Tax Consultants, December 6, 2021

[1] the specifics of determining bank income in the form of interest are established by Article 290 of the Tax Code of the Russian Federation

[2] for banks, the specifics of determining expenses in the form of interest are determined in accordance with Articles 269 and 291 of the Tax Code of the Russian Federation

[3] left in force by the Determination of the Supreme Arbitration Court of the Russian Federation dated March 28, 2012 No. VAS-2810/12

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Accounting entries for interest-free loans

Postings for an interest-free loan depend on the other party to the transaction. An employee received an interest-free loan - accounting entries are made using account 73. If this is a third-party individual, then account 76. If a transaction on an interest-free loan is made between legal entities, then account 76 is also used. In entries for an interest-free loan issued to another organization, account 58 should not be used maybe, since a loan with a rate of 0 is not a financial investment. The table below lists possible accounting options for interest-free loan transactions between legal entities, as well as with individuals.

Description	Dt	CT
Accounting with the lender
An interest-free loan was issued	73.1, 76	51, 50
Loan amount repaid	51, 50	73.1, 76
Personal income tax is withheld from the employee’s material benefit	70	68 subaccount “NDFL”
PNO accrued if the transaction is recognized as controlled	99	68 subaccount “Income tax”
Accounting with the borrower
Received an interest-free loan	51, 50	66, 67
Loan amount repaid	66, 67	51, 50

Documents found on the topic “interest-free loan agreement 2018”

Sample. Loan agreement ( interest-free ) with payment of the loan in installments. Money loan agreement → Sample.
Loan agreement (interest-free) with payment of the loan amount in installments loan agreement ( interest-free ) "" 20 citizen, hereinafter referred to as (last name, first name, patronymic) " lender ",...
Agreement loan (interest-free)
Money loan agreement → Loan agreement (interest-free)
loan agreement ( interest-free ) (date of conclusion of the agreement ), called ...
Agreement interest-free loan from the founder of the company
Money loan agreement → Interest-free loan agreement from the founder of the company participant
-free loan agreement from the founder/member of the company (place of conclusion of the agreement ) ...
Agreement loan (interest-free) with an employee
Debt, loan agreement → Loan agreement (interest-free) with an employee
agreement No. of a loan ( interest-free ) with an employee of the city, hereinafter referred to as the “ lender ”, in ...
Agreement interest-free loan from the founder of the company participant (2)
Money loan agreement → Interest-free loan agreement from the founder of the company participant (2)
-free loan agreement from the founder/member of the company (place of conclusion of the agreement ) ...
Sample. Agreement loan (interest-free)
Money loan agreement → Sample. Loan agreement (interest-free)
loan agreement ( interest-free ) "" 20, hereinafter referred to as (name of organization) " lender ", represented by, ...
Sample. Agreement interest-free loan between a shareholder of a closed joint stock company and the company
Money loan agreement → Sample. Interest-free loan agreement between a shareholder of a closed joint-stock company and the company
...and the board of directors (name of company) minutes no. dated "" 20, Chairman of the Board of Directors \\ loan agreement no. ( interest-free ) "" 20 closed joint-stock company, called (name of the company) in ...
Sample. Agreement interest-free loan between an employee of a closed joint stock company and the company
Money loan agreement → Sample. Interest-free loan agreement between an employee of a closed joint-stock company and the company
...and the board of directors (name of company) minutes no. dated "" 20, Chairman of the Board of Directors \\ loan agreement no. ( interest-free ) "" 20 closed joint-stock company, called (name of the company) in ...
Sample. Agreement interest-free loansecured by a guarantee between the shareholder of a closed joint stock company and the company
Money loan agreement → Sample. Agreement on an interest-free loan secured by a guarantee between a shareholder of a closed joint-stock company and the company
...and the board of directors (name of company) minutes no. dated "" 20, Chairman of the Board of Directors \\ loan agreement no. ( interest-free ) "" 20 closed joint-stock company called (name of the company) in yes ...
Sample. Agreement interest-free loan between a shareholder of a closed joint-stock company and a company with collateral (property pledge)
Money loan agreement → Sample. Interest-free loan agreement between a shareholder of a closed joint-stock company and a company with collateral (property pledge)
...and the board of directors (name of company) minutes no. dated "" 20, Chairman of the Board of Directors \\ loan agreement no. ( interest-free ) "" 20 closed joint-stock company, called (name of the company) in ...
Sample. Agreement interest-free loan between an employee of a closed joint stock company and a company with collateral (property pledge)
Money loan agreement → Sample. Interest-free loan agreement between an employee of a closed joint-stock company and a company with collateral (property pledge)
...and the board of directors (name of company) minutes no. dated "" 20, Chairman of the Board of Directors \\ loan agreement no. ( interest-free ) "" 20 closed joint-stock company called (name of the company) in yes ...
Agreement loan (interest on the amount loan paid simultaneously with the principal amount loan upon expiration of the period for which the loan is provided)
Money loan agreement → Loan agreement (interest on the loan amount is paid simultaneously with the principal amount of the loan upon expiration of the period for which the loan is provided)
loan agreement (date of conclusion of the agreement ), hereinafter referred to as...
Agreement pledge of shares to ensure the return of the amount loan By agreement loan
Agreement of pledge and mortgage → Agreement of pledge of shares to ensure repayment of the loan amount under the loan agreement
agreement on pledge of shares no. "" 20, hereinafter referred to as (last name, first name, patronymic) "mortgagor", on the one hand, ...
Sample. Agreement pledge of an apartment owned by the pledgors to ensure the return of the amount loan By agreement loan
Pledge and pledge agreement → Sample. Pledge agreement for an apartment owned by the mortgagors to ensure repayment of the loan amount under the loan agreement
contract no. pledge of property (apartment) "" 20 closed joint-stock company, (name of company) named after...
Agreement about providing interest-free loans
Debt, loan agreement → Interest-free loan agreement
agreement No. (on provision of a loan) » » 20 , hereinafter referred to as the “lender”, represented by...

Results

An interest-free loan between legal entities or between a citizen and an organization is completely legal. If the parties to such an agreement are independent persons or any Russian persons, then they will not bear an additional tax burden. Tax risks in such a transaction arise if it is recognized as controlled. Then the lender must accrue additional taxable income based on the requirements of the Tax Code of the Russian Federation.

Sources: