Controlled debt is a term that appeared in the tax legislation in 2002. Represents outstanding debt between companies where the debtor is a Russian company and the creditor is a foreign company. How is loan interest calculated? What are the nuances of taxation?
Legislative regulation
“Peculiarities of accounting for interest on debt obligations” - Article 269 of the Tax Code of the Russian Federation. This is the main article to rely on when it comes to controlled debt. In 2005, Federal Law No. 58 appeared, which legalized the expansion of the article in terms of the circle of creditors. Federal Law No. 25, adopted at the beginning of 2018, made it possible to supplement the article of the Tax Code. The new wording refers to situations in which the debt is not recognized as controlled. These include:
A foreign company - a creditor, has placed bonds and receives income.
A legal entity or individual - the creditor is an interdependent organization, a resident of the Russian Federation during the reporting period.
A creditor that has an affiliated foreign enterprise has no debts to it during the reporting period.
There have been changes in the rules for calculating interest on such loans.
How is controlled debt formed?
A debt that has arisen to a foreign company becomes controllable in the following situations:
The loan was taken from a foreign company that owns at least a fifth of the Russian one. It doesn't matter if it's direct or indirect.
The debt appeared before a Russian company, but it is affiliated with a foreign one.
The creditor is Russian, but a foreign company acted as a guarantor or guarantor.
The share of foreign capital in the authorized capital of the creditor cannot be less than 20%. Otherwise, debt control by a foreign company is not possible.
Outstanding loans subject to debt control include:
exceeding the capitalization of the debtor company by 3 times;
exceeding the capitalization of a group of companies, financial institutions - 12.5 times.
As soon as the debt becomes controllable, it is necessary to pay interest to foreign partners for using the money. The legal way of their deduction is dividends.
Debt calculation
The Tax Code, in an effort to reduce the tax burden on businesses, provides for a number of restrictions on interest. The system includes the following conditions:
Debt in Russian rubles is subject to an interest rate of 75 to 125%. It is subject to review annually.
A loan in foreign currency depends on the rate of a foreign country. It is allowed to increase it by 4-7 points. This applies to the euro and pound sterling.
Debt in Japanese yen and Swiss francs is calculated at the LIBOR rate. For the yen, it increases by 2 points, and for the franc by 5.
Interest on debt can be written off as expenses at the end of the reporting period. The tax rate is calculated taking into account the capitalization ratio.
The nuances of debt formation
The Ministry of Finance issued Letter No. 23476 in 2013. It contains a number of clarifications in determining the relationship between the debtor and the creditor. The following points must be met:
The required share of foreign capital from the creditor company must be confirmed.
With cross ownership, there is an entry of founders from two sides.
Ownership by ring type is proved by building a chain of beneficiaries.
It is also required to comply with the concept of affiliates, as partners who are in a legal or factual relationship and are able to influence each other's actions.
In a situation where during the year the ratio between its own capital and foreign capital has changed, the Ministry of Finance makes clarifications:
There is no need to recalculate expenses in the current year.
The calculation of the costs associated with the transfer of interest is carried out in a discrete or discontinuous way.
The calculation for the end date of each month is made separately. If you need to recalculate the old periods, you need to re-generate the report for each month.
If the foreign firm has left the founders of the creditor, then the loan ceases to be controlled.
To avoid double taxation, it has been established at the global level that companies must include an appropriate clause in the agreement between them, explaining the procedure for paying taxes. For example, if a domestic company deducts payments to a foreign company, then the income of the second party is recorded in the country of the payer.
If the debt to a foreign creditor significantly exceeds equity, then a number of nuances are taken into account when calculating controlled debt:
The loan interest limit is set to 0.
Any income is treated as a dividend.
When determining costs, interest paid is not taken into account.
Since 2017, the interdependence between companies is confirmed only by an extract from the Unified State Register of Legal Entities, which lists a foreign investor partner.
Debt, or debt obligation, in modern Russian practice, as well as throughout the world, is understood as the amount of funds that the subject must pay as debt repayment. In accounting, there are two main types of debt - accounts receivable and accounts payable.
Accounts receivable is the amount of payments due to this organization to be received from its counterparties based on the results of economic interaction with them. For example, receivables will be the amount that the buyer owes to the organization that supplied him with any goods or services. Accounts payable - the amount that the organization itself must pay to its counterparties as a result of economic relations with them. An example would be a payment that an entity has committed to making for the supply of raw materials to its partner.
Thus, debts are often understood as amounts that have not been paid on invoices within a certain period, which may have happened due to technical reasons, for example, the duration of the payment through the bank. However, in the current legislation, debt obligations also include planned long-term items of expenditure, such as various loans and credits provided to organizations by specialized financial institutions or non-financial enterprises, regardless of the procedure for their execution.
The concept of controlled debt to a foreign organization
When debt is understood as a system of long-term planned payments, the question of what size and quality of these debt obligations can be considered acceptable in the specific financial situation in which the enterprise is located becomes relevant. This question becomes even more significant when the answer to it lies in the plane of international relations, in particular, when a Russian organization acts as a borrower, and a foreign organization acts as a lender.
In this situation, it is necessary to determine what is. The degree of controllability of the debt of a Russian organization to a foreign company is quite clearly regulated by the current legislation. The content of the main provisions of paragraph 2 of Article 269 of the Tax Code of the Russian Federation indicates that the prerequisite for the recognition of such debt is the nature of the relationship between the company that provided the loan and the organization that received it.
Conditions for recognizing debt to a foreign organization
This section of the tax legislation provides for three main situations in which the nature of such relations is recognized as satisfying the criterion of debt controllability.
In particular, the law highlights the following among them: 
- a Russian company has received a loan or a loan from a foreign organization that directly or indirectly owns 20% or more of its authorized capital;
- a Russian company has received a loan or a loan from another Russian company, which, in accordance with the criteria set forth in the current legislation, is affiliated with a foreign organization;
- a Russian organization received a loan or a loan that a foreign company that is directly or indirectly the owner of 20 or more percent of its authorized capital, or a Russian company that, in accordance with the criteria set forth in the current legislation, is affiliated with a foreign organization, acted as an entity that ensures the fulfillment of the terms of this loan (for example, a guarantor, guarantor, etc.).
The main criteria determining the applicability of these conditions to a particular situation
Understanding the full meaning of these conditions requires a definition of the terminology used in them. For the first situation, the disclosure of the meaning of the concepts of direct and indirect ownership of shares in the authorized capital is of decisive importance. In accordance with the current legislation, direct ownership is recognized as the direct participation of a foreign organization in its formation. And indirect ownership is such participation through other organizations.
For example, foreign organization “A” owns 50% of the authorized capital of the Russian organization “B”, which, in turn, is the owner of 30% of the authorized capital of the Russian organization “C”. In this case, organization “A” is recognized as indirectly owning a share in the authorized capital of company “C”, and the size of this share is determined by multiplying the share of company “A” in the authorized capital of company “B” by the share of company “B” in the authorized capital of company “C” . In this case, the indirect share of organization “A” in the authorized capital of enterprise “B” will be 15%.
The second situation requires deciphering the concept of affiliation. The use of this concept in relation to controlled debt in modern Russian practice is interpreted in accordance with the instructions given in the Letter of the Department of Tax and Customs Tariff Policy of the Ministry of Finance of the Russian Federation dated July 11, 2007 No. 03-03-06 / 1/480 “On the procedure for recognizing expenses in the form of interest on controlled debt”. This letter indicates that for the interpretation of the concept of affiliation, one should use the law of the RSFSR dated March 22, 1991 No. 948-1 “On competition and restriction of monopolistic activity in commodity markets”. In this document, an affiliate is understood as an individual or an enterprise that is able in one way or another to influence the conduct of business by legal entities.
In addition, article 4 of this law provides an exhaustive list of persons who can be considered as affiliated with this organization - let's call it "D". These include:
The third situation, specified in the law, requires the disclosure of the functions of the guarantor and the guarantor. In accordance with Article 361 of the Civil Code of the Russian Federation, a surety for the obligations of an organization is a person who, under the terms of the contract, assumes responsibility for the obligations of this organization to its creditor.
The concept of a guarantor has a certain similarity with the concept of a guarantor, however, it has some specific features that make it possible to separate these terms. In accordance with Article 368 of the Civil Code of the Russian Federation, a guarantor is an entity that gives an obligation to pay the creditor, referred to in the law as the beneficiary, upon a written request, the entire amount constituting the loan of the principal, that is, the recipient of the guarantee. At the same time, the conditions for making such a claim are prescribed in the contract concluded with the guarantor, and the latter can only be an insurance organization or a bank or other credit institution. In other words, a legal entity whose field of activity is concentrated in another area of the economy, or an individual cannot act as a guarantor.
The practical meaning of establishing the fact of the presence of controlled debt to a foreign organization
At the same time, the establishment of the fact whether a given debt of a Russian organization to a foreign company belongs to the category of controlled ones has a quite clearly expressed practical meaning. The fact is that in accordance with the current legislation of the Russian Federation, the amount of interest paid for the use of a loan or credit is not taxed. However, in the event that credit relations arise between Russian and foreign organizations, the established maximum value of such interest directly depends on whether the existing debt is recognized as controlled.
Based on the ratio of the amount of controlled debt and equity of the organization, the maximum amount of interest on such a loan, recognized as an expense, is determined. This value correlates with the amount of interest paid to the foreign lender on this loan, after which, on this basis, the accountant will be able to calculate the procedure for paying taxes associated with the provision of this loan, as well as the amount of taxes payable on this basis.
Such a mechanism for assessing the main characteristics of a loan or credit provided by a foreign organization to a Russian company is established by law in order to counter tax evasion by overestimating the amount of interest on such loans. The formulas for calculating the maximum interest rate are designed in such a way that attempts to overestimate the interest on a loan received by a Russian company from a foreign organization turn out to be not only contrary to the requirements of the law, but also economically unprofitable for both participants in such a transaction.
At the same time, however, these formulas assume the possibility of changing the limit value of interest in accordance with the current situation on the credit market. But this possibility, as a rule, is associated with a specific time period.
Controlled debt is a debt that an entity has to another interdependent entity, and the debt is currently outstanding. If such a debt arises before a foreign organization, then it will have a number of features, most of them related to taxation.
Let's consider these and other features of working with controlled debt to a foreign organization.
controlled debt
Controlled debt to a foreign entity can be considered debt that falls under the following options:
- The debt is owed to a company that owns at least 1/5 of the debtor organization.
- For existing debt, a foreign company acts as a guarantor or guarantor.
In addition, the existing debt must be 3 times the total cost of capital of the company.
If we are talking about the debt to the bank that issued the lease, then it should be 12.5 times the cost of capital.
Meaning of recognizing debt to a foreign controlled entity
Having established conditions for calling debt controlled is not an accidental part of the legal framework. The classification of a particular debt as controlled has a special meaning:
- General change in taxes.
- Changing the way taxes are calculated.
- Features of the procedure for paying taxes.
In addition, special formulas for calculating taxes on such debt exclude the possibility of overestimating the interest on the loan. Moreover, the increase in interest seems to be unprofitable for both parties in the transaction.
Normative base
regulated by article 269 of the tax code. Paragraphs 2-13 contain information on debts to a foreign organization. It highlights the following most important points:
- The main consequence of the emergence of controlled debt is the calculation of the maximum amount of interest on it. The limit value of interest is calculated for the final date of the tax period. To do this, the interest on debts on the current date is divided by the capitalization ratio on the current date.
- To calculate the capitalization ratio, it is necessary to divide the company's equity capital, and then another by 3. When cooperating with companies engaged in leasing activities, it is necessary to divide by 12.5.
These calculations are relevant in the case when all the necessary conditions are met. Such difficulties in calculating interest are due to the fact that it is beneficial for a foreign organization to use thin capitalization in financing. This type of capitalization implies the replacement of dividends with interest on loans upon payment, which leads to a reduction in the finances received by the state treasury.
This implies another feature specified in the Tax Code of the Russian Federation, which determines the transition of interest into dividends in the case when the debt exceeds the budget many times over.
Calculation of interest in case of non-compliance with conditions
In cases where the debt exceeds 3 times or 12.5 times for companies engaged in leasing activities, interest must be calculated according to a different regulatory framework. For this, paragraph 1 of Article 269 of the Tax Code of the Russian Federation is used. According to this paragraph, the interest is calculated on the basis of the refinancing rate of the Central Bank of the Russian Federation, or on the basis of the average debt rate. The method of calculation is also influenced by the individual characteristics of the contract.
The calculation of the limit value at the average rate is calculated taking into account the following nuances:
- This method is prescribed in the accounting policy of the company and in the current quarter, if there were at least 2 obligations made on similar terms.
- The % indicated in the costs may deviate from the average level by no more than 20%.
With the calculation method at the refinancing rate, slightly different rules are relevant:
- Calculation in this way is relevant if it is reflected in the accounting policy of the company, but at the same time the company should not have other obligations with comparable conditions.
- If the debt is in rubles, then the amount of% indicated in the expenses should not exceed the interest at the refinancing rate multiplied by 1.8. If the debt is in foreign currency, then the coefficient will be 0.8.
Formulas for calculating taxes on controlled debt do not allow you to overestimate the% on the loan.
Change in the ratio of controlled liabilities to equity
Throughout the payout period—for example, a year—circumstances may arise in which the ratio between a firm's equity and controlled debt will vary. As for the company's actions in this case, the following recommendations of the Ministry of Finance will work here:
- There is no need to recalculate the expenses made earlier.
- The controllable debt percentage expense is determined in a discontinuous or discrete manner.
- In order to calculate the limit amount, it will be necessary to calculate the totals for the last day of each of the reporting periods, and not just the expenses that were not previously indicated. It is not necessary to summarize the obtained indicators, and the reference for establishing costs is recognized as untenable.
Thus, the accounting department will need to calculate the percentage of controlled debt on the last date of each quarter, and if the ratio changes from controlled debt to the company's equity, do not recalculate.
Changes in the share of a foreign company
Sometimes a situation arises in which during the first quarters a foreign organization had one share, and the debt exceeded the capital by 3 or 12.5 times, respectively, and after that the share changed (for example, it was sold). In such a situation, the accounting for debt interest changes, taking into account the following features:
- In a situation where the share of a foreign organization exceeded 20%, the rules of the Tax Code, Art. 269 p. 2.
- If the company completely gives up its share, then the share becomes equal to zero, and the basic procedure for calculating interest does not apply. In this case, it is necessary to be guided by paragraph TC of paragraph 1 of Art. 269 RF.
- With proper work and correct performance of actions, additional recalculation of expenses for the accounting periods of the year will not be required.
- If at the end of the year the existing debts have already been paid off, then there is no need to additionally recalculate expenses from the tax base
Note that similar rules apply in the event of a decrease in the share of a foreign organization, and in the event of its increase.
International agreements
The law, which was in force until 2011, practically excluded restrictions on the accrual of interest on controlled debt to a foreign organization. This rule came into force in cases where an agreement was concluded between the two organizations for the avoidance of double taxation. As a result, the taxpayer challenged the agreement in court, and the court took the position of the foreign company, finding its position otherwise onerous.
At the end of 2011, the Presidium of the Supreme Arbitration Court of the Russian Federation changed the rules of judicial practice on this issue. At the moment, all the conditions specified in paragraph 2 of Article 269 of the Tax Code of the Russian Federation are valid in any case, regardless of whether an agreement was concluded between the companies on the avoidance of double taxation or not.
Controlled debt is regulated by article 269 of the tax code.
Lack of equity
Almost all calculations in the calculation of interest require the amount of equity. But sometimes there is a situation when the capital of the organization is zero or even negative. In this case, the following nuances will apply for calculations, and the following indicators will be used:
- The limit % indicator is 0.
- The amount of income is reported as dividends paid by the third party company.
- The expenses do not take into account the interest on the debt.
The Ministry of Finance of Russia clarifies that in such circumstances the calculation of the capitalization ratio becomes impossible, therefore both the limit amount% and the amount of expenses taken into account will be equal to 0.
Double tax treaty
If an international agreement between two firms contains information on the avoidance of double taxation, then, according to the Tax Code of the Russian Federation, in this case a number of the following rules and regulations will apply:
- Usually, income transferred from a firm in one country to an enterprise in another country must be recorded in the first firm under the same conditions as in the case of payments to residents of this state. This rule is usually prescribed in the contract, if the law of both states provides such an opportunity.
- If the % accrued on controlled debt, as well as the conditions of Article 269 of the Tax Code of the Russian Federation, are observed, and there is an agreement on the avoidance of double taxation, then it becomes necessary to calculate the limiting total %, taking into account the capitalization ratio. This opinion is shared by the Ministry of Finance and the financial department. The main purpose of the rule is to prevent tax evasion.
Restrictions on % accounting are not discriminatory. Arbitration courts fully agree with this position.
Examples
In order to more accurately understand what debt will be considered controlled and what are the features of debts to a foreign organization, as well as to consider taxation in different situations, let's pay attention to the following examples:
Additional information about changes in accounting for interest on controlled debt on the video:
Thus, when calculating, it is necessary to rely on the terms of the contract with a foreign organization, as well as on the tax code and the main recommendations of the Ministry of Finance today.
The concept of controlled debt is contained in the Tax Code of the Russian Federation. The corresponding article 25 of the Tax Code of the Russian Federation appeared only in 2002. This regulation is frequently amended because controlled debt is not yet fully regulated by law. The last amendment entered into force in February 2017. Let's try to understand the concept.
What is controlled debt
Almost every company resorts to loans. They are needed to create conditions for the continuation of activities. If the funds were taken from a foreign entity, they may be recognized as controlled debt. Controlled loans are:
- Debts to a foreign company if the latter owns at least 1/5 of the authorized capital of its debtor. It does not matter the nature of ownership: direct or indirect.
- Debts to a Russian company recognized as an affiliate of a foreign entity.
- To a Russian company whose loan is secured by a loan obligation (guarantee, guarantee and other methods). It is assumed that either a foreign firm or an affiliated person will be responsible for ensuring obligations.
- To affiliated foreign entities, if the debt exceeds the capital of the company by more than three times. If the debtors are banking institutions or leasing entities, it is assumed that the amount of debt to capital will exceed 12.5 times.
A controlled debt is formed by a domestic organization to a foreign entity or a firm equivalent to a foreign entity.
BY THE WAY! An affiliate is a firm that can influence the activities of another legal entity. The corresponding explanation is given in Article 4 of the Federal Law No. 948-1 "On Competition" as amended on July 26, 2006.
Regulations
Controlled debts are regulated by Article 269 of the Tax Code of the Russian Federation “Nuances of Accounting for Interest on Obligations”. Previously, loans taken from foreign entities were considered controlled debt. However, in June 2005, amendments appeared that expanded the circle of creditors. In particular, loans to affiliated legal entities are now recognized as controlled. In 2005, Federal Law No. 58 was also signed, concerning changes in the second part of the Tax Code.
Debt is not recognized as controlled in these cases:
- It was formed during the placement of bonds by foreign legal entities with the subsequent extraction of dividends.
- The debt appeared to interdependent legal entities and individual entrepreneurs, if they are recognized as tax residents throughout the reporting period.
- Individual entrepreneurs and legal entities, to which the debtor has a debt, have no outstanding loans to affiliated legal entities throughout the reporting period.
In 2017, amendments were introduced that established new rules for accounting for interest on debts.
Interest calculation procedure
Before calculating, you need to study what is included in the structure of controlled debt. The latter includes interest on liabilities. Their size does not exceed the total amount of accruals included in the percentage. Consider the procedure for calculating interest:
- At the end of each reporting period, the debtor transfers the maximum possible amount of interest charges. Accruals are the ratio of the amount of interest accrued on debt at the end of the period to the capitalization ratio.
- The coefficient is calculated on the last date of the tax period. To obtain it, you need to divide the total amount of debt by the amount of the authorized capital. Then you need to divide the result by 3 (for ordinary legal entities) or 12.5 (for leasing companies and banking institutions).
- The statutory fund does not include arrears on fees and debts, overdue payments and deferred payments.
The main rule for determining controlled debts is their calculation on the final date of the tax period. The settlement periods are 3 and 9 months, half a year.
Interest is determined on these balance lines:
- Column 300 (assets).
- Boxes 690 and 590 (obligations).
- Column 623 and 624 (debt on tax payments).
The calculation is performed according to this formula:
Spread = Sfact% * CoefCap
The formula contains these values:
- Spread - the maximum amount of interest recognized as expenses and subject to a reduction in the taxable base.
- Sfact % - accrued interest.
- Coefficient Cap - coefficient of capitalization.
This formula is used to determine the capitalization ratio:
CoefCap = Skz / Sobcap / 3
The formula uses these values:
- Skz is the amount of controlled debt that has not been paid.
- SobKap - the value of the debtor's fund.
If the value of the fund is zero at the end of the period, interest on debt in the reporting period will not be taken into account.
Consider the main stages of calculations:
- Determining the amount of equity capital. This value is equal to the share of direct or indirect participation of a foreign company in the capital of the debtor. To determine this value, you need to multiply the equity capital by the share of participation of a foreign person.
- Setting the capitalization ratio.
- Establishment of the maximum amount of interest that is taken into account for taxation on the basis of paragraph 3 of Article 269 of the Tax Code of the Russian Federation. For calculations, it is necessary to divide the actually accrued interest by the capitalization coefficient determined earlier.
IMPORTANT! If the interest on obligations is greater than the limit interest (determined at the third stage of calculations), the resulting difference is recognized as dividends that are paid to a foreign company. The amount will be taxed at a rate of 15% on the basis of paragraph 3 of Article 284 of the Tax Code of the Russian Federation.
Features of controlled debt management
Interest on controlled liabilities is treated as dividends. But the accountant should keep in mind that accounting for these dividends differs in some nuances. In particular, for standard dividends, the 3rd sheet of the income tax return is filled out. To account for dividends from controlled debt, you need to fill out a document in the form of KND 1151056. When taxing, an accountant may encounter these nuances:
- The tax base is determined by the method of accrual. Payment of taxes on dividends and recognition of liabilities as controlled takes place on the final day of the reporting period. Reporting forms are filled out taking into account payments transferred to foreign companies.
- Dividends from foreign entities to which there are controlled liabilities are subject to tax rates. The rate is determined on the basis of international treaties. Sometimes controlled liability clauses are used to deduct interest from the tax base. This measure is needed to prevent double taxes.
- If an affiliate is indirectly dependent on a foreign company, no tax is charged or withheld. Interest on debts is taken into account in the structure of expenses.
All considered difficulties are successfully prevented. To do this, the accountant must have a good knowledge of the laws, all amendments, and also correctly interpret legal norms.
IMPORTANT! It is recommended to attach an explanation to the reports submitted to the tax authority. The document contains a list of regulations that were used in the preparation of the report.
Accounting for controlled debt
To account for liabilities, you need these entries:
- DT91/2 KT66. Calculation of interest on liabilities.
- DT99 KT68. Accrual of permanent tax liabilities.
- DT68 KT99. Accrual of permanent tax assets (applied if the debt is no longer controllable).
Instructions on bookkeeping are contained in paragraph 7 of PBU 15/2008, in section 3 of PBU18/02.
Interest on controlled debt is accounted for in a special manner. It all depends on the amount of debt and the size of the equity capital of the organization.
If the amount of controlled debt is more than 3 times the amount of the organization's own capital, then interest should be normalized according to the rules of clause 2 of Art. 269 of the Tax Code of the Russian Federation. If there is no such excess, then also take into account the interest based on the actual rate specified in the contract.
Interest on controlled debt
For debt obligations in a controlled transaction, the organization has the right to take into account, when calculating income tax, interest calculated on the basis of the actual rate, but only if this rate is less than the maximum value of the limit value range.
Interest limits on controlled debt can be tied to:
- to the key rate of the Bank of Russia;
- international rates EURIBOR, SHIBOR, LIBOR.
It all depends on the currency in which the obligations are drawn up. So, for example, for a contract in euro, an interval is set from the EURIBOR + 4% rate to the EURIBOR + 7% rate. This follows from the provisions of paragraph 3 of clause 1, clauses 1.1, 1.2 of Article 269 of the Tax Code of the Russian Federation.
As a general rule, include accrued interest in expenses without restrictions, based on the actual rate stipulated by the terms of the transaction. If the transaction is recognized as controlled, then in the calculation of income tax, interest can be taken into account, calculated on the basis of the limit value. This follows from the provisions of Article 269 of the Tax Code of the Russian Federation.
Controlled Debt: Interest Calculation
The procedure for accounting for interest on controlled debt for tax purposes depends on its amount as of the last day of the reporting (tax) period. It is equal to the total amount of controlled debts for all debt obligations that arise in different cases. Debt obligations are loans (including commodity and commercial), loans, bank deposits and accounts and other borrowings, regardless of the method of registration. The amount of interest accrued on them is not included in the amount of debt obligations (clause 1 of article 269 of the Tax Code).
If the amount of controlled debt on the last day of the reporting (tax) period exceeds the equity of the organization by no more than three times, then the interest accrued for this period should be taken into account in the general manner. Compare with equity the total amount of all controlled liabilities.
An organization engaged in leasing activities is entitled to apply the general procedure for accounting for interest if the amount of controlled debt exceeds its own capital by no more than 12.5 times. This rule is for organizations whose income from leasing activities for the reporting (tax) period is at least 90 percent of all income. The calculation includes income that is taken into account when calculating income tax (paragraph 2, clause 3, article 269 of the Tax Code).
If the amount of controlled debt on the last day of the reporting (tax) period exceeds the equity capital of the organization by more than three times, then take into account the interest accrued for this period in a special manner. An organization that engages in leasing activities is required to apply a special interest accounting procedure if the amount of controlled debt exceeds its equity capital by more than 12.5 times.
BASIC: income tax
When calculating income tax, take into account interest on controlled debt as part of non-operating expenses (subclause 2, clause 1, article 265 of the Tax Code). If the organization uses the accrual method, then include the accrued interest in the expenses for the last day of the reporting (tax) period (paragraph 1, clause 3, article 269 of the Tax Code). If the organization uses the cash method, then include the accrued interest in expenses for the last day of the reporting (tax) period in which they were paid (paragraph 1, clause 3, article 269, clause 3, article 273 of the Tax Code).
How to apply the “thin capitalization rules” to interest on controlled debt? When taxing profits, interest on controlled debt can be taken into account only within the limits (paragraph 3 of article 269, subparagraph 2 of paragraph 1 of article 265 of the Tax Code). Use the following rules to determine the percentage limit.
On the last day of each reporting (tax) period, calculate the maximum amount of interest on controlled debt taken into account when calculating income tax. In this case, the calculation of interest on controlled debt is carried out according to the formula:
The amount of interest accrued in the reporting (tax) period means interest accrued in the last quarter (month) of the reporting (tax) period. Thus, determine the maximum amount of interest separately at the end of each reporting period, and not on an accrual basis. When changing the ratio of the amount of outstanding controlled debt and the amount of equity in the subsequent reporting period compared to the previous one, it is not necessary to recalculate the amount of interest taken into account when calculating income tax (paragraph 1, clause 4, article 269 of the Tax Code).
Calculate the capitalization ratio based on the amount of outstanding controlled debt for all debt obligations, and not separately for each creditor. This follows from paragraph 3 of article 269 of the Tax Code, letter of the Ministry of Finance dated 10.08.2016 No 03-03-07 / 46763.
The specified procedure for determining the values of the capitalization ratio and the maximum amount of interest on controlled debt applies to organizations that use both the accrual method and the cash method (clause 4 of article 269 of the Tax Code). That is, with the cash method, it is also necessary to calculate the indicators for the last day of each reporting (tax) period, regardless of the period in which the interest was paid (accounted for as expenses).
Compare the maximum amount of interest obtained by calculation with the amount of interest actually accrued (paid) on a loan (credit).
If the actually accrued (paid) interest is less than the limit value, take it into account in tax expenses in full. If more, only the marginal value can be taken into account when calculating income tax. Calculate the maximum interest on the reporting date. This is the last day of each reporting (tax) period (clauses 3 and 4 of article 269 of the Tax Code).
The remaining amount (the positive difference between the amount of accrued (paid) interest and the limit value) is considered dividends for tax accounting purposes. From this amount, the organization must withhold income tax or personal income tax (clause 6 of article 269 of the Tax Code).
If the value of the organization's equity capital is negative or equal to zero, then it is impossible to determine the capitalization ratio. In this case, do not include interest on controlled debt in expenses (marginal interest is zero). In other words, the entire amount of interest will be recognized as dividends. Abroad, the recognition of interest (part of interest) as dividends in such cases is called the “rule of thin capitalization”.
Tax the interest equivalent to dividends that you pay on controlled debt to a foreign organization, taking into account the norms of an international treaty (clause 1, article 7 of the Tax Code). At the same time, apply the rules of international agreements that are provided specifically for dividends, and not for interest (letters of the Ministry of Finance dated 12/27/2017 No 03-03-06/1/87340, dated 06/17/2013 No 03-03-06/1/22382, p 14 of the review approved by the Presidium of the Supreme Court on February 16, 2017). Document your eligibility for benefits. If such interest was paid to a foreign company before the reporting date, transfer the tax withheld to the budget on the reporting date (Letter of the Ministry of Finance dated 05/24/2017 No 03-03-РЗ/31710).
This follows from paragraph 6 of Article 269, paragraph 3 of Article 284 of the Tax Code. Similar clarifications are contained in the letters of the Ministry of Finance of July 16, 2010 No 03-03-06 / 1/465, the Federal Tax Service of April 10, 2012 No ED-4-3 / 6008, the Federal Tax Service for Moscow of April 18, 2006 No 20-12 / 31077 . The courts also point out that in case of insufficient capitalization, it is impossible to take into account “excess interest” when calculating income tax and they are recognized as dividends (see, for example, decisions of the Presidium of the Supreme Arbitration Court of November 15, 2011 No 8654/11, the Arbitration Court of the Moscow District of January 26, 2011). 2015 No Ф05-16095/2014).
