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From the point of view of tax calculation, what is the most seamless way to apply for a loan for a business owner?

It may seem strange, but it is less beneficial to apply for a loan at a rate of 0% than at an interest rate higher than zero. How come?

This is because an interest-free loan from a company is now subject to income tax under the law.

It is one thing to calculate the interest on the loan, quite another to actually pay it. Here, it is desirable to draw up the Loan Agreement so that the interest should be paid at the time when the entire loan is repaid.

It should be remembered that in related party transactions there are significant restrictions on deadline extensions – a loan issued in 2018 and later may not exceed 12 months. And it would be best to repay it at the end of the year in order to reissue early next year – practically creating a kind of credit line. If this principle is not followed, then the so-called “dividend-equivalent costs” will arise and the corporate income tax will have to be paid on the loan amount. Businessmen often forget about it.

P.S. Next time, we will find out how to desirably establish cooperation with the SRS during its audit.

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