Q: It is difficult for a wholly-owned subsidiary to find a guarantee company because of financial difficulties. Only when the parent company provides guarantee can the loan be operated normally. Can a subsidiary deduct the guarantee fee charged by the parent company before tax with reference to the standards of foreign guarantee companies (issuing guarantee fee invoices for subsidiaries and extracting business tax)? Answer: Article 8 of the Enterprise Income Tax Law stipulates that reasonable income-related expenses actually incurred by an enterprise, including costs, expenses, taxes, losses and other expenses, are allowed to be deducted when calculating taxable income. According to the above provisions, the guarantee expenses incurred by subsidiaries for borrowing from banks for production and operation are reasonable expenses related to production and operation activities and can be deducted before tax according to regulations. However, in combination with Articles 41 and 46 of the Enterprise Income Tax Law, Articles 38 and 119 of the Regulations for the Implementation of the Enterprise Income Tax Law, Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance of People's Republic of China (PRC) on Tax Policy Issues Concerning the Pre-tax Deduction Standard for Interest Expenses of Related Parties of Enterprises (Cai Shui [2008] 12 1No.), and the Implementation Measures for Special Tax Adjustment (Trial), According to Article 119 of the Provisional Regulations of the Enterprise Income Tax Law, the term "debt investment" as mentioned in Article 46 of the Enterprise Income Tax Law refers to the interest-paying financing that the enterprise obtains directly or indirectly from related parties and needs to repay the principal and pay interest, or needs to be compensated in other ways. The creditor's rights investment indirectly obtained by enterprises from related parties includes: (1) creditor's rights investment provided by related parties through unrelated third parties; (2) The creditor's rights investment provided by an unrelated third party shall be guaranteed by the related party and bear joint liability; (3) Other creditor's rights investments with substantial liabilities obtained indirectly from related parties. According to Article 87 of Guo Shui Fa [2009] No.2 document, the interest expense mentioned in Article 46 of the Enterprise Income Tax Law includes the interest, guarantee fee, mortgage fee and other expenses with interest nature actually paid directly or indirectly with the debt investment. Article 1 of the Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Tax Policy Issues Concerning the Pre-tax Deduction Standard for Interest Expenses of Related Parties of Enterprises (Caishui [2008] No.65438 +02 1) stipulates that when calculating the taxable income, the interest expenses actually paid by enterprises to related parties shall be deducted if they do not exceed the following proportion and the relevant provisions of the tax law and its implementing regulations, and the excess part shall not be deducted in the current year and the following years. The actual interest expenses paid by the enterprise to the related parties are as follows: (1) 5:1for financial enterprises; (2) Other enterprises: 2: 1. According to the above provisions, the situation described in the question belongs to the provision in Item (2) of Article 119 of the Provisional Regulations of the Enterprise Income Tax Law that the bank (an unrelated third party) provides the creditor's rights investment, and the parent company (related party) shall bear the joint liability guarantee.
Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.