Is it necessary for a subsidiary to borrow money from the parent company?

Need. The legal person of a subsidiary is different from that of the parent company, and the subsidiary and the parent company are related parties. According to Guo Shui Fa [2000] No.84 document, if a taxpayer borrows more than 50% of its registered capital, the interest expenses of the excess part shall not be deducted before tax. However, if the parent company has sufficient evidence to prove that the relevant funds are obtained from financial institutions, this lending relationship can be treated as a normal inter-enterprise lending relationship rather than a related party relationship, so subsidiaries need to go through the formalities to borrow from the parent company.