A few days ago, after the article on whether shareholders need to pay taxes for personal loans to enterprises was published, it attracted the attention of many customers. Others came to ask whether there would also be tax if the reverse operation, that is, the individual shareholder borrows money from the enterprise for free and does not pay it back for a long time, or the individual borrows money from the enterprise for the purchase of a house, etc?
In practice, enterprises lend to individuals for free, usually based on the following circumstances:
1. Individual shareholders occupy funds in the name of loans and do not repay them for a long time;
2. Individual shareholders or their family members need to borrow from the enterprise for free due to the purchase of houses;
3. Based on the need to motivate employees, the enterprise borrows the funds for employees to buy houses or cars for free.
The loan provided by an enterprise to an individual for free shall be deemed as sales
As for the enterprise side, according to Article 14 of the Measures for the Implementation of the Pilot Program of Replacing Business Tax with VAT (CS (2016) No. 36), "The following situations are deemed to be sales of services, intangible assets or immovable property: (1) A unit or individual industrial and commercial household provides services to other units or individuals free of charge, except for those used for public welfare undertakings or targeted at the public; (2) An entity or individual transfers intangible assets or immovable property to another entity or individual for free, except those used for public welfare undertakings or targeted at the public. （3） Other circumstances stipulated by the Ministry of Finance and the State Administration of Taxation. The value added tax on loans made by the company to individuals for free (unless otherwise specified) shall be treated as sales. " It can be seen that enterprises should pay VAT if they provide loans to individuals (whether shareholders, employees or others) for free.
However, since it is a value-added tax, it should refer to the value-added part, and its tax base should be the interest of bank loans in the same period as the tax base of enterprise value-added tax.
Individual income tax shall be paid for the free loans obtained by individuals from enterprises
As for the income tax issues arising from the individual's free borrowing from the enterprise, due to the different personal identities involved, their income tax payment conditions and tax rates are also different. The State Administration of Taxation has issued a series of regulations, such as:
1. CS (2003) No. 158 Notice on Regulating the Administration of Individual Income Tax Collection of Individual Investors;
2. GSF (2005) No. 120 Notice on Printing and Distributing the Administrative Measures for Individual Income Tax;
3. Cai Shui (2008) No. 83 Wholesale on the Issue of Enterprises Levying Individual Income Tax on Purchasing Houses or Other Properties for Individuals.
According to the above laws and regulations, it can be concluded that:
1. Individual investors who borrow from enterprises for free shall pay 20% individual income tax as "interest, dividend and bonus income" when the following conditions are met:
(1) The term of free loan from the enterprise exceeds one year;
(2) The funds were not used for the production and operation of the enterprise.
Article 2 of CS (2003) No. 158 stipulated that the term of this type of loan was not repaid after the end of the tax year, but paragraph (4) of Article 35 of Guo Shui Fa (2005) No. 120 redefined as "the loan with a term of more than one year and not used for enterprise production and operation shall be taxed in strict accordance with relevant regulations".
2. Individual investors who borrow money from enterprises to purchase houses and other properties shall pay 20% individual income tax according to "interest, dividend and bonus income" when meeting the following conditions:
(1) Free loans are used to purchase houses and other properties, and the ownership is registered as an investor or an investor's family member;
(2) The loan term exceeds one year.
In the CS (2008) No. 83 document, the State Administration of Taxation made it clear in the reply to the Jiangsu Provincial Department of Finance and the Local Taxation Bureau that the above income obtained by individual investors or their family members in sole proprietorship enterprises and partnerships shall be regarded as the profit distribution of enterprises to individual investors, and individual income tax shall be levied according to the item of "income from production and operation of individual businesses"; The above income obtained by individual investors or their family members of enterprises other than sole proprietorship enterprises and partnerships shall be regarded as the dividend distribution of enterprises to individual investors, and individual income tax shall be levied according to the "interest, dividend, bonus income" item.
3. If the free borrower is an employee of an enterprise, regardless of the purpose of borrowing for the purchase of a house or other property, according to the provisions of the CS (2008) No. 83 document, "the above income obtained by other employees of the enterprise shall be subject to individual income tax in accordance with the" income from wages and salaries "item."
4. If the unpaid borrower is neither an individual investor nor an employee of an enterprise, the individual income tax shall be levied on the contingent income according to the provisions of the Individual Income Tax Law.
Special attention should be paid to the difference between the VAT payable on the interest part of the enterprise's free loan to individuals and the VAT payable on the individual's income tax basis should be the full amount of the loan rather than the bank interest in the same period. Therefore, for those investors who are accustomed to "borrowing" enterprise funds to individuals, learning to effectively isolate enterprise funds (assets) from personal funds (assets) is also the basic knowledge to avoid increasing tax burden.
