When borrowing between enterprises, the interest earner shall pay VAT and additional tax. The general taxpayer enterprise value-added tax rate is 6%; The collection rate of value-added tax for small-scale taxpayers is 3%. Value-added tax is a turnover tax based on the value-added amount of goods (including taxable services) generated in the circulation process.
Tax treatment of inter-company loans:
1. Does the borrowing company need to pay interest: If the borrowing company pays interest, interest expenses may need to pay interest tax;
2. Tax treatment of interest income: the interest income collected by the loan company is subject to income tax according to regulations;
3. Compliance of the loan contract: The tax authorities will examine whether the loan contract conforms to market principles to determine the legality of its tax treatment;
4. Application of related taxes: Depending on the nature and terms of the loan, it may involve taxes such as value-added tax and enterprise income tax;
5. Tax issues of cross-border loans: If inter-company loans are involved, international tax agreements and transfer pricing issues may need to be considered.
To sum up, inter-company loans need to pay value-added tax and additional tax. The corporate tax rate of taxpayers is 6%, and the tax rate of small-scale taxpayers is 3%. Value-added tax is a turnover tax based on the value-added amount generated in the process of commodity circulation.
Legal basis:
Provisional Regulations of the People's Republic of China on Business Tax
Article 4
Taxpayers providing taxable services, transferring intangible assets or selling real estate shall calculate the taxable amount according to the turnover and the prescribed tax rate. Calculation formula of tax payable: tax payable = turnover multiplied by tax rate. The turnover is calculated in RMB. If a taxpayer settles its turnover in a currency other than RMB, it shall be converted into RMB for calculation.