Loan transactions between parent and subsidiary companies are very common in practice. If the parent company collects loan interest from its subsidiaries, these interest income should be included in the scope of VAT collection. According to Article 2 1 of Volume IV of Interpretation Summary of Value-added Tax Policy (Edition 20 19) issued by the Ministry of Finance of People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China, the loan interest of subsidiaries collected by the parent company belongs to labor income, which should be included in the taxable items of value-added tax and can be deducted from the input tax. Although the loan transaction between the parent company and the subsidiary company is essentially an internal transaction, the law still requires the parent company to issue a formal special VAT invoice to the subsidiary company and deduct the VAT. At the same time, if the loan interest charged by the parent company to the subsidiary company exceeds the benchmark interest rate of RMB loans 1.5 times announced by the Ministry of Finance in the same period, it is necessary to pay stamp duty, interest tax and other taxes and fees. Therefore, it is necessary to carry out strict tax management on the loan transactions of parent-subsidiary companies.
If the parent company and subsidiaries are located in different regions, how to deal with the value-added tax on loan interest? If the parent company and its subsidiaries are located in different administrative regions, the processing method of value-added tax shall be implemented in accordance with the Announcement of State Taxation Administration of The People's Republic of China City, People's Republic of China (PRC) on Adjusting the Handling Methods of Tax-related Matters in Different Regions. If it is necessary to declare and pay value-added tax separately, it shall apply to the competent tax authorities in different places for issuing online transfer vouchers to realize the tax payment at the place where the enterprise is located. At the same time, for the loan transaction between the parent company and its subsidiaries, it is necessary to carry out specific operations according to relevant local laws and regulations.
Loan transactions between parent and subsidiary companies involve a series of tax issues, and the specific handling methods need to strictly abide by relevant laws and regulations. Therefore, enterprises should be cautious and actively fulfill their tax obligations in the loan transactions between parent and subsidiary companies to ensure the legitimate operation and steady development of enterprises.
Legal basis:
According to the Value-added Tax Law of People's Republic of China (PRC) and its implementing regulations, sales of goods, provision of taxable services or import of goods from abroad in China shall be taxed according to law. Among them, the sales of goods and taxable services between domestic enterprises and their domestic branches, or between domestic enterprises and domestic enterprises directly invested by them, are regarded as taxpayers selling goods or providing taxable services to themselves, and their income is regarded as one of the taxable items of value-added tax.