A citizen who has provided a loan to a company, but asks not to pay interest on it, but to add it to the principal debt, still receives taxable income. For the borrower, who is a tax agent in this situation, it is important to accurately determine the day the income arose. According to the Russian Ministry of Finance, this is the date of interest capitalization.
A company that received a loan from an individual automatically becomes his tax agent for personal income tax, since the citizen generates income in the form of interest on the loan. And the company, which is the source of income for an individual, needs to correctly determine on what day such income is considered paid and received. After all, no later than the next day, such a company is obliged to pay to the budget the tax withheld from the income of an individual (clause 6 of Article 226 of the Tax Code of the Russian Federation).
The question arises of what is considered the date of income if the lender is in no hurry to receive the interest in hand and their capitalization occurs: they are not paid, but are included in the amount of the principal debt, and in the future interest will also be accrued on them.
The answer given by the Russian Ministry of Finance in a published letter is as follows: the day of receipt of income, subject to the capitalization of interest, is the day they are added to the loan amount. As you can see, it will not be possible to defer tax payment until the entire capitalized amount of income is paid.
EXAMPLE
On March 1, 2009, the company took out a loan from citizen K.P. Kulakov with the condition of monthly capitalization of accrued interest. The loan amount is 500,000 rubles, the rate is 7.3% per annum. Interest is calculated on the last day of the month.
On March 31, 2009, the company accrued 3,100 rubles in favor of Kulakov. percent (RUB 500,000 * 7.3%: 365 days * 31 days). Of these, she withheld tax in the amount of 403 rubles. (RUB 3,100 * 13%). As a result, Kulakov’s income after tax was 2,697 rubles. (3100 rub. - 403 rub.). The company did not pay him this amount, but included it in the principal debt on the loan. Thus, the amount of debt increased to 502,697 rubles. (RUB 500,000 + RUB 2,697).
As of April 30, 2009, interest on the loan will amount to RUB 3,016.18. (RUB 502,697 * 7.3%: 365 days * 30 days). Personal income tax from them - 392.19 rubles. (RUB 3,016.18 * 13%), and the loan amount is RUB 505,320.99. (RUB 502,697 + RUB 3,016.18 - RUB 392.19), etc.
To substantiate its position, the Russian Ministry of Finance referred to subparagraph 1 of paragraph 1 of Article 223 of the Tax Code of the Russian Federation. This rule states: the date of actual receipt of income in cash is the day of payment of income, including its transfer to an individual’s bank accounts or, on his behalf, to the accounts of third parties. Moreover, the specialists of the main financial department do not provide any other arguments in the published letter. However, it is difficult to challenge their conclusion.
There is no doubt that at the time of capitalization of interest, the person who provided the loan receives an economic benefit in monetary form. After all, their amount increases the size of the organization’s monetary obligation to the lender, that is, the amount on which, in turn, interest is also charged. For tax purposes, such a benefit is recognized as income (Article 41 of the Tax Code of the Russian Federation).
In addition, the operation of adding interest to the principal amount of the loan can be divided into two stages. Interest is first paid to the lender. He then manages this amount, transferring it to the borrower. And as already mentioned, the date of actual receipt of income is the day of its payment (subclause 1, clause 1, article 223 of the Tax Code of the Russian Federation).
Note that the Russian Ministry of Finance has always been of the opinion that the date of capitalization of interest should be considered the date of actual payment of income. This can be seen from the explanations of the main financial department for banks - tax agents that attract citizens' funds into deposits on the terms of interest capitalization (see, for example, letters of the Ministry of Finance of Russia dated 02/20/09 No. 03-04-06-01/37, dated 01/28/09 No. 03-04-06-01/9, dated 07.25.08 No. 03-04-06-01/234). These letters can also be useful for a regular borrowing company, since it is in the same position as a bank.
Interest capitalization, that is, its inclusion in the initial cost of the asset, is carried out in the case when borrowed funds are spent on the acquisition of an investment asset
Investment assets include fixed assets, property complexes and other similar assets that require large time and financial costs for acquisition and (or) construction. If the listed objects are purchased directly for resale, then they do not belong to investment assets; they should be accounted for as goods in account 41 “Goods”. This is the only type of asset that, by direct indication of PBU 15/01, does not relate to investment.
Costs for loans received and credits intended to finance the acquisition and (or) construction of an investment asset must be included in the cost of this asset. The inclusion of costs in the initial cost of an investment asset is possible subject to the following conditions
The occurrence of expenses for the acquisition and (or) construction of an investment asset,
Actual start of work
Availability of actual costs for loans and credits.
Interest can be calculated in one of the following ways:
Using simple interest formulas using a fixed rate
Using compound interest formulas using a fixed rate
Using simple interest formulas using a floating rate
Using compound interest formulas using a floating rate
When suspended acquisition, construction and (or) production of an investment asset for a long period (more than three months), interest payable to the lender (creditor) ceases to be included in the cost of the investment asset from the first day of the month following the month of suspension of the acquisition, construction and (or) production of such an asset.
During the specified period, interest payable to the lender (creditor) is included in other expenses of the organization.
When renewing the acquisition, construction and (or) production of an investment asset, the interest payable to the lender (creditor) is included in the cost of the investment asset from the first day of the month following the month of resumption of acquisition, construction and (or) production of such an asset.
The period during which additional approval of technical and (or) organizational issues that arose during the acquisition, construction and (or) production of an investment asset is not considered a period of suspension of the acquisition, construction and (or) production of an investment asset.
For tax accounting purposes, interest on debt obligations is a non-operating expense. Moreover, Article 269 of the Tax Code of the Russian Federation establishes the specifics of attributing interest on borrowed funds to expenses accepted for deduction when calculating corporate income tax (two methods are used to determine them:
1) determination of the average level %
2) use of the refinancing rate of the Central Bank of the Russian Federation, increased by 1.1 (1.5) times for debt obligations in rubles and by 15% (22) - for debt obligations in foreign currency)
In accordance with clauses 19, 20 of PBU 15/01, additional costs may include costs associated with providing legal services to the borrower; consulting services; carrying out copying and duplicating work; payment of taxes (in cases provided for by current legislation); carrying out examinations; consumption of communication services; other costs directly related to obtaining loans and credits and placing borrowed obligations.
Additional expenses can be reflected in the accounting period in which they were made in two ways
1. these expenses are either pre-accounted for as receivables with subsequent inclusion in operating expenses during the repayment period of these loan obligations.
2. are included in operating expenses in the period in which they occurred.
Debt on loans and credits received is shown taking into account interest due at the end of the reporting period (monthly).
Example 6. In March 2005, an organization decided to take out a short-term loan for 4 months. for the acquisition of current assets in the amount of 200,000 rubles. To obtain advice on lending issues, the organization turned to a specialized company, the cost of which was 9,000 rubles. (including VAT RUB 1,373). In accounting, expense transactions are reflected in the following entries: in March 2005.
option 1: additional costs are charged to other expenses in the reporting period in which they occurred. Recording is made:
Dt 91 Kt 76 7,627 rub. (9,000 - 1,373) additional costs associated with obtaining a loan were written off;
option 2: Additional costs are included in accounts receivable and subsequently charged to operating expenses during the repayment period of the loan obligations. Records are made:
Dt 76 Kt 76 7,627 rub. (9,000 - 1,373) reflects the cost of legal services excluding VAT as additional costs;
Dt 91 Kt 76 7,907 rub. (RUB 7,627: 4 months) part of the additional costs associated with obtaining a loan was written off (this entry is repeated monthly from March to June 2005).
Analytical accounting is carried out by types of loans and credit organizations. Loans not repaid on time are accounted for separately.
Accounting for loans.
The loan agreement is determined by Art. 807 of the Civil Code of the Russian Federation, according to which one party transfers money or things into ownership to the other party. And the borrower undertakes to return the same amount of money (things) to the lender.
It should be noted that the contract is considered concluded at the moment of transfer, and not receipt of funds.
An organization can obtain loans by issuing bonds against promissory notes, as well as by concluding loan agreements.
The loan agreement can be gratuitous (without %) and compensated (with %)
According to the new chart of accounts, 66.67 accounts are provided to reflect loans received through the issue and placement of bonds (Article 816 of the Civil Code of the Russian Federation). To ensure separate accounting of such loans, the working chart of accounts provides for a sub-account “Loans secured by bonds”.
Example #1:
100 pieces of bonds of 10,000 rubles each were placed at a cost above par value of 16,000 rubles, with payment of 20% per annum and an obligation to repay in 6 months.
Dt 51 Kt 66=1000000 - loan amount received on account by issuing bonds
Dt 51 Kt 98=600000 - received on the account the amount of excess of the placement price over their
nominal value
Dt 98 Kt 91/1=100000 - write-off of excess price over nominal
cost (interest on bonds is accrued evenly during the circulation period)
Dt 91/2 Kt 66=10000 - interest accrued on bonds (1000000*20%/360*180)
Dt 66 Kt 51=1100000-repayment of bonds with payment of%
Example #2:
The same bonds are placed at a price below par at 9,400 rubles per unit.
Dt 51 Kt 66=940000 - loan amount received by issuing bonds
Dt 91/2 Kt 66=1000 - additional charge of excess nominal value
above the cost of accommodation (every month)
Dt 91/2 Kt 66=100000 - interest accrued on bonds
(1000000*20%/360*180)
Dt 66 Kt 51=1100000 - repayment of bonds with payment of %
Other property may be obtained under the loan agreement
Capitalization of interest - inclusion of interest on a loan (loan, deposit) in the principal debt.
The term capitalized interest is also used in relation to interest calculated by the capitalization method. This percentage is also called Compound Interest.
A comment
Interest capitalization is the inclusion of interest on a loan (loan, deposit) in the principal debt.
This term is not directly defined in legislation, but it is used in law enforcement practice (for example, in court decisions).
Example
The organization received a loan for a period of 1 year at 12 percent per annum in rubles, with monthly interest accrual.
If the agreement does not contain a clause on the capitalization of interest, then the organization will have to pay 12% per annum for the year.
If the agreement contains a provision for the capitalization of interest, then for the year the organization will have to pay more than 12% per annum, since the amount of interest accrued during the period will be included in the amount of debt and the interest of the next month will be calculated from the amount of the original debt increased by the amount previously accrued interest.
An example of calculating interest when capitalizing it is given in paragraph 1.3. Methodological recommendations to the Regulations of the Bank of Russia “On the procedure for calculating interest on transactions related to the attraction and placement of funds by banks, and the reflection of these transactions in accounting accounts” dated June 26, 1998 N 39-P” (approved by the Bank of Russia 14.10. 1998 N 285-T):
1.3. Accrual of interest on the amount of a term deposit subject to monthly capitalization of interest
On July 20, 1998, the bank enters into a term deposit agreement with the depositor for 3 months (deposit repayment period is October 20, 1998). The deposit amount is 10 thousand rubles. The interest rate is 22%; on the 20th day of each month of the contract, the accrued interest is capitalized. The agreement does not provide for re-issuance of the deposit upon expiration of the agreement on the previously valid terms of the fixed-term deposit. Payment of interest added to the deposit amount is carried out upon expiration of the agreement.
During the term of the agreement, the bank capitalizes the accrued interest into the deposit three times - 08/20/98, 09/20/98 and 10/20/98.
10.20.98 - expiration date of the term deposit agreement, the depositor did not show up for the deposit within the period established by the agreement. On the same day after the end of the operating day, the bank re-registers the specified time deposit as a demand deposit.
On 10/28/98, the depositor receives the amount of the demand deposit and interest accrued for the period from 10/20/98 to 10/27/98 inclusive (8 calendar days) at the established rate of 4%.
The full term of the term deposit (20.07 - 20.10.98) is 93 calendar days (n), the period for calculating interest at the rate of the term deposit is 22% (20.07 - 19.10.98) - 92 calendar days (n - 1).
The full term of the demand deposit (10.20 - 10.28.98) is 9 calendar days (n), the period for calculating interest at the demand deposit rate is 4% (10.20 - 10.27.98) - 8 calendar days.
The procedure for calculating interest on the deposit amount by the bank:
The amount of the term deposit as of 08/21/98 (with capitalization of interest accrued for the period from 07/20/98 to 08/19/98 inclusive):
10,000 rub. + (10,000 rub. x 22% x --------) = 10,186 rub. 85 kopecks
The amount of the term deposit as of 09/21/98 (with capitalization of interest accrued for the period from 08/20/98 to 09/19/98 inclusive):
RUB 10,186.85 + (10186.85 rub. x 22% x --------) = 10377 rub. 19 kopecks
The amount of the term deposit as of the end of the business day on 10/20/98 (with capitalization of interest accrued for the period from 09/20/98 to 10/19/98 inclusive), at the end of the business day on 10/20/98 re-registered as a demand deposit.
Most likely, not all residents of our country know the percentage. Nevertheless, this is an important concept on which the final amount of income from a bank deposit depends. In its essence, capitalization is an analogue of which, in turn, is the accrual of interest on already accrued interest on a deposit.
For example, a legal entity or individual placed money on deposit with a credit institution in the amount of 100,000 rubles at 10% per annum. If interest is accrued once at the end of the year, the investor will receive 110,000 rubles back.
If they are accrued monthly, and they, in turn, are accrued interest in the same amount (10%), then the amount in the account by the end of the year will be: 100,000 rubles. (initial amount) x (1 + 0.1 (rate in shares)\12 (number of accrual periods) to the power of 12 (number of periods for which money is placed, 12 months) = 110,471.31 rubles. That is, the income was 471 rubles more. This is what capitalization of interest is. The difference, of course, is small, but the larger the amount, and the more often interim income is accrued, the greater the amount of benefit received as a result.
But a deposit with interest capitalization is not always unconditionally more profitable than the same operation with interest accrued at the end of the period. You should always pay attention to the size of the contract period and the interest accrual period. For example, an agreement with an accrual rate of 12% per annum at the end of the year will be more profitable than an agreement with a rate of 10% with compound interest calculated monthly throughout the year.
What is capitalization of interest from an accounting perspective? If an organization has placed any amount on deposit with interest payment, then it is taken into account among financial investments. Interest on the deposit agreement is accrued depending on its terms. At the same time, from an accounting point of view, it does not matter whether this interest has been received or not yet.
A deposit with monthly interest capitalization in the amount of 100,000 rubles at a rate of 10 percent per annum will be reflected in accounting as follows: Debit 58 account Credit 51 account for the principal amount (100 thousand rubles). After the end of the interest accrual period (monthly for 12 months), the Debit 76 account and Credit reflect the fact of accrual in the amount of 100,000 x (1 + 0.1 \ 12) to the power of 12 = 10,471.31 rubles. Then the return of funds from the deposit (initial 100 thousand rubles) is reflected in the Debit of account 51 and Credit. And finally, the interest already received is taken into account (10,471.31 rubles) through the following accounting entries: account 76 is debited and credited.
What is interest capitalization from a tax perspective? Here, if an enterprise records expenses and income in accordance with the accrual methodology, interest is reflected at the end of the corresponding reporting period (year), even in cases where deposit agreements are concluded for a longer period, for example, three years. This rule is established by Article 271 of the Tax Code in relation to loan agreements and other similar agreements.
Home > DocumentCapitalization of borrowing costs
When purchasing fixed assets, the initial cost, as is known, includes all costs of acquisition, construction (construction), transportation, installation, adjustment, including:
- amounts paid to asset suppliers and contractors for construction and installation work under contracts; registration fees, state duties and other similar payments made in connection with the acquisition (receipt) of rights to an object of fixed assets; customs duties and fees; amounts of taxes and fees in connection with the acquisition (creation) of fixed assets (if they are not reimbursed); amounts paid for information and consulting services related to the acquisition (creation) of fixed assets; costs of insuring the risks of delivery (creation) of fixed assets; remunerations paid to intermediaries through which the fixed asset was acquired; costs of installation, installation, commissioning and commissioning of fixed assets; interest on long-term loans (loans) aimed at the construction of fixed assets; other expenses directly related to bringing the asset into working condition for its intended use.
- basic approach assuming no capitalization of costs (interest) on loans during the construction period; alternative approach, in which capitalization is carried out only on the actual costs (interest) on loans incurred during the construction period.
At the same time, no distinction is made regarding whether these costs are associated with the acquisition (purchase) or construction of fixed assets.
The following are recognized as borrowing costs:
- interest on bank overdrafts, short-term and long-term loans; amortization of discounts or premiums associated with borrowed funds; amortization of additional costs incurred in connection with obtaining loans and borrowings; finance lease payments paid in excess of the principal amount (cost) of the leased property; exchange differences arising on loans in foreign currency, to the extent that they are considered an adjustment to the cost of repaying loans.
- qualifying asset; capitalization period; capitalized amount.
- expenses on the asset have already been incurred; work is being done to prepare the asset for its intended use or sale; There are interest costs.
| date | Expenses, USD | Capitalization period | Weighted average accumulated expenses, c.u. |
| March 1 | 400000 | 10/12 | 333333 |
| August 1 | 700000 | 5/12 | 291667 |
| December 1 | 300000 | 1/12 | 25000 |
| 1400000 | 650000 |
| Types of debt obligations | Principal amount of debt obligations, c.u. | Interest on debt obligations, c.u. |
| 10% bill for 2 years | 500000 | 50000 |
| 5% bonds for 5 years | 7500000 | 375000 |
| Total | 8000000 | 425000 |
| 1. | Construction Bond: A 12% note with a maturity of 2 years issued to finance the acquisition of land and construction of a building. Issued in December 2005, with interest paid on an annual basis. | 500000 |
| 2. | Long-term 14% - loan, repayment period 2 years. Received in January 2005 with interest paid on an annual basis. | 400000 |
| 3. | 15% bonds with a maturity of 6 years. Issued on December 31, 2004, with interest paid on an annual basis. | 400000 |
3. The weighted average accumulated construction costs for 2004 are calculated:
| Amount of expenses | * | Capitalization period | = | Weighted average accumulated expenses |
|
| 1st of January | 200000 | 12/12 | 200000 | ||
| April 1 | 180000 | 9/12 | 135000 | ||
| June 1st | 240000 | 7/12 | 140000 | ||
| September 1 | 300000 | 4/12 | 100000 | ||
| 31th of December | 80000 | 0 | 0 | ||
| Total: | 1000000 | 575000 |
- for the part of the weighted average accumulated expenses that is less than or equal to any amount of target borrowings intended for the production of assets, the interest rate accrued on target loans is used; For the portion of weighted average accumulated expenses that exceed any borrowings specifically intended to finance the construction of assets, a weighted average of the interest rates on all other debt obligations outstanding for the current period is used.
| Debentures | Interest rate | Accrued interest for 2006 |
|||
| Target debt: bill | 500000 | 12% | 60000 | ||
| Total debt: | |||||
| Credit | 400000 | 14% | 56000 | ||
| Bonds | 400000 | 15% | 60000 | ||
| Total: | 1300000 | 176000 |
| Credit | 400000 | 14% | 56000 | ||
| Bonds | 400000 | 15% | 60000 | ||
| Total: | 800000 | 116000 |
The costs of borrowings that could have been avoided are calculated:
| Accumulated costs (weighted average) | Interest rates | Borrowing costs that could have been avoided |
| 500000 | 12% | 60000 |
| 75000 | 14,5 | 10875 |
| 575000 | 70875 |
| D-t. Building | 80000 | ||
| K-t. Cash | 80000 | ||
| D-t. Building (Capitalized Interest) | 70875 | ||
| D-t. Interest expenses |