Intercompany borrowings are taxable.

For loans between enterprises, value-added tax and surcharges must be paid on interest income. The value-added tax rate for general taxpayers is 6%; while the value-added tax rate for small-scale taxpayers is 3%. Value-added tax is a turnover tax levied based on the value-added amount generated during the circulation of goods (including taxable services) as the basis for tax calculation.

Tax treatment of inter-company borrowings:

1. Whether the borrowing company needs to pay interest: If the borrowing company pays interest, the interest payment may be subject to interest tax;

2. Tax treatment of interest income: The interest income collected by the loan company must pay income tax according to regulations;

3. Compliance of the loan contract: The tax authorities will review whether the loan contract complies with market principles and determine whether the loan contract complies with market principles. Determine the legality of its tax treatment;

4. Application of relevant taxes: Depending on the nature and terms of the loan, VAT, corporate income tax and other taxes may be involved;

5. Cross-border Tax aspects of borrowing: If inter-company borrowing is involved, international tax treaties and transfer pricing issues may need to be considered.

To sum up, inter-company borrowings need to pay value-added tax and surtax. The corporate tax rate for taxpayers is 6, and the tax rate for small-scale taxpayers is 3. Value-added tax is a turnover tax based on the added value generated during the circulation of goods.

Legal basis:

"Provisional Regulations of the People's Republic of China on Business Tax"

Article 4

Taxpayers shall provide For tax services, transfer of intangible assets or sale of real estate, the tax payable shall be calculated based on the turnover and the prescribed tax rate. The formula for calculating tax payable is: tax payable = turnover multiplied by tax rate. Turnover is calculated in RMB. If a taxpayer settles its turnover in a currency other than RMB, it shall be converted into RMB for calculation.