The pre-tax deduction of loan interest expenses has always been the focus and difficulty of taxpayers. On the occasion of final settlement, this paper draws taxpayers' attention to the following issues. The following net small series will answer for you, hoping to help you. Differences between accounting and tax law of interest expenses In accounting treatment, the borrowing costs incurred by enterprises, whether from financial institutions or non-financial institutions, regardless of the interest rate, should be capitalized or included in profits and losses according to the actual amount. In tax treatment, not all the actual interest expenses can be deducted as financial expenses, and the tax law has strict restrictions on the scope and standard of deduction of loan interest expenses, so enterprises should make necessary adjustments when making annual final settlement. What kind of documents should be used as the legal documents for pre-tax deduction of interest expenses borrowed from non-financial enterprises? According to the Provisional Regulations on Business Tax and the Notice of State Taxation Administration of The People's Republic of China on Printing and Distributing the Answers to Business Tax Questions (Part I) (Guo Shui Han [1995] No.156), loans belong to the tax collection scope of "financial insurance", and the interest income obtained by non-financial enterprises or individuals from loans belongs to business activities, so business tax should be levied. Article 19 of the Measures for the Administration of Invoices stipulates that the payee shall issue an invoice to the payer when collecting money from foreign business operations. Therefore, the interest expenses incurred by enterprises in borrowing from other enterprises or individuals should be based on invoices as legal documents for pre-tax deduction. In the practice of tax collection and management, if the interest-receiving party is unable to issue invoices, it is generally required that the enterprise or individual of the receiving party should issue invoices on behalf of the tax authorities. Enterprises should use relevant agreements as relevant proof materials for paying interest, and the agreement should clearly stipulate the time and amount of interest. Interest expenses should be distinguished for specific purposes. According to Article 8 of the Enterprise Income Tax Law and Articles 27, 37 and 38 of the Regulations for the Implementation of the Enterprise Income Tax Law, interest expenses on loans should be distinguished for specific purposes. First, whether the interest expense of the enterprise is the actual and reasonable expense related to income, if not, it is not allowed to be deducted before enterprise income tax. Second, whether the interest expenses of the enterprise need to be capitalized. If the enterprise borrows money for the purchase and construction of fixed assets, intangible assets and inventories that can be sold after more than 12 months of construction, the reasonable borrowing expenses incurred during the purchase and construction of the relevant assets should be included in the cost of the relevant capital as capital expenses, and depreciation, amortization or deduction should be made according to relevant regulations. Deduction is allowed if it belongs to the reasonable borrowing costs incurred by the enterprise in the process of production and operation without capitalization, including the interest expenses of non-financial enterprises borrowing from financial enterprises, the interest expenses of various deposits and interbank lending of financial enterprises, and the interest expenses of enterprises issuing bonds with approval. Identification of affiliated enterprises and tax adjustment How to identify related parties, Article 19 of the Regulations for the Implementation of the Enterprise Income Tax Law stipulates in principle, that is, "related parties refer to enterprises, other organizations or individuals that have one of the following related relationships with enterprises: (1) There are direct or indirect control relationships in capital, operation, purchase and sale; (2) Being directly or indirectly controlled by a third party; (3) There are other related relationships in interests. " Since borrowing money from related parties to pay interest belongs to related party transactions, the tax law stipulates that if an enterprise reduces its taxable income or income by not charging or paying the price or expenses according to the business dealings between independent enterprises, the tax authorities have the right to make reasonable adjustments within 1 years from the year when the business occurs, pay back the relevant tariff of interest income and calculate interest. At the same time, it is stipulated that as long as the transaction between domestic related parties with the same actual tax burden does not directly or indirectly lead to the reduction of the overall national tax revenue, in principle, transfer pricing investigation and adjustment will not be made. Tax Adjustment Method for Interest Expenditure If an enterprise borrows from both non-related parties and related parties, the shareholders' capital contribution is not in place, and the ratio of debt to capital borrowed from related parties exceeds the limit, the interest that cannot be deducted shall be calculated separately. Interest expense of loan that cannot be deducted by the enterprise in the year = part that cannot be deducted because the interest rate of loan from non-related parties exceeds the limit+part that cannot be deducted because the shareholder's capital contribution is not in place+part that cannot be deducted because the proportion of loan from related parties exceeds the limit. To sum up, the income tax adjustment of enterprise loan interest expenses should pay attention to the borrower, whether it is a financial enterprise or a non-financial enterprise or individual; Second, we should pay attention to whether there is a relationship between the enterprise and the lender; Third, we should pay attention to whether the shareholder's capital contribution is in place, and the proportion limitation of related creditor's rights investment and equity investment. At the same time, to grasp the pre-tax deduction, we must rely on legal and valid vouchers, that is, invoices issued by tax authorities, accurately understand the loan interest rates of similar financial enterprises in the same period, master the procedures and methods for the identification of related parties and special tax adjustment, and be familiar with the calculation methods of various interest expenses. The above is the legal knowledge about this, and I hope it can help you. 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Article 75 Tax-related incomes from fines and confiscations of tax authorities and judicial organs shall be turned over to the state treasury according to the tax warehousing budget levels.