Should Interest Free Financing Be Taxable?

The basis for the collection of business tax and income tax is:

1, the thirty-sixth provision of the tax administration law stipulates that business pactions between establishments and establishments established by enterprises or foreign enterprises within the territory of China shall be paid or paid in accordance with the business pactions between independent enterprises, and the tax authorities shall have the right to make reasonable adjustments in accordance with the business pactions between independent enterprises, or the payment or payment of fees and expenses in accordance with the business pactions between independent enterprises.

2, the fifty-fourth section of the detailed rules for the implementation of the tax administration law stipulates that there are several business situations between taxpayers and their associated enterprises, and that the tax authorities can adjust their taxable amount, including the amount that can be agreed between the funds paid or charged by the financing fund or the enterprises that are not affiliated with each other, or the interest rate exceeds or below the normal interest rate standard for similar businesses.

3, the seventh provision of the Provisional Regulations on business tax stipulates that taxpayers who provide taxable services, pfer intangible assets or sell real estate are obviously low in price and have no justifiable reasons, and the competent tax authorities shall check their turnover.

Article twentieth of the detailed rules for the implementation of the Provisional Regulations on business tax stipulates that taxpayers have the obvious low price as stipulated in regulation seventh, and there is no justification or fifth taxis listed in the detailed rules shall be regarded as taxable activities without any turnover.

4, the enterprise income tax is based on the forty-first chapter of the sixth chapter of the enterprise income tax law, that is, the business pactions between enterprises and their affiliates, which do not conform to the principle of independent pactions and reduce the taxable income or income of the enterprises or their associated parties. The tax authorities have the right to adjust them in a reasonable way.

The basis for the collection of income tax is not:

The third provision of the detailed rules for the implementation of the Provisional Regulations on business tax stipulates that the provision of labor services, the pfer of intangible assets or the sale of immovable property under the provisions of Article 1 of the regulation refer to the acts of providing compensation for labor, paid pfer of intangible assets or the pfer of real property ownership by compensation under the regulations (hereinafter referred to as taxable acts).

In accordance with the existing Provisional Regulations on business tax and the detailed rules for its implementation, an economic act accords with the scope of business tax levy, while the business tax law emphasizes that business tax should be levied on the condition of paid acquisition.

The fifth provision of the detailed rules for the implementation of the Provisional Regulations on business tax stipulates that taxpayers shall be deemed to have taxable activities in any of the following circumstances: (1) a unit or individual will give the real estate or the right to the land to other units or individuals without any compensation; (two) the sale of the buildings built by the units or individuals themselves (hereinafter referred to as self built), and the self construction actions taken by them; (three) other situations stipulated by the Ministry of Finance and the State Administration of taxation.

The above stipulates that the sales tax for gratuitous acts is the only case.

The act of gratuitous financing does not belong to the above enumeration, and no business tax should be levied.

From the point of view of the principle of tax law, the Provisional Regulations on business tax belong to the substantive law of Taxation, while the tax administration law is a tax procedural law.

One of the functions of the tax procedural law is to guarantee the implementation of the substantive law and make up for the deficiency of the substantive law. If the economic behavior of interest free lending is directly dealt with according to the tax collection and management law, it is open to question.

In terms of legal practice, it is generally applicable to the entity law to collect taxes for an economic act. The rights and obligations of the tax authorities and taxpayers are generally prescribed by the procedural law.

Direct adoption

It is obviously not in conformity with the original intention of legislation to calculate tax collection.

In accordance with the principle that the law specifically stipulates that it is higher than the general stipulations, the thirty-sixth section of the tax collection and administration law is a general tax provision, while the fifth section of the Provisional Regulations on business tax and the detailed rules for the implementation of the Provisional Regulations on business tax are fifth special provisions on business tax.

"Special issue"

The thirtieth provision of the notice on implementation measures (Trial Implementation) (tax return No. [2009]2): pactions between domestic parties with the same actual tax burden, as long as the paction does not directly or indirectly lead to a reduction in the total tax revenue of the state, shall not be investigated and adjusted in the principle of pfer pricing.

The article clearly indicates that, in the absence of a reduction in state tax revenue in general, the pactions between domestic parties with the same actual tax burden can not be pferred to price investigation and adjustment in principle.

In related party pactions, because the borrower is free to lend funds for the related party to use, and does not earn interest income, the income is not recognized in the accounting. At the same time, the user of the fund has not been deducted as the cost of capital before the tax deduction. Therefore, the overall amount of taxable income has not been reduced and the enterprise income tax has been paid less.

Personally, I think that the indirect reduction of the total tax revenue of the state can be investigated and adjusted. This can basically collect income tax, because the adjustment of income tax will inevitably lead to the profit sharing of the shareholders of the related parties, which will lead to the change of the tax amount of the shareholders.

Even more widely, until we find the change of tax amount.

Therefore, income tax should be imposed.

But business tax should not be levied.

Business tax is clearly provided with compensation, and it should not be imposed without explicit compensation.

As for the provisions of the tax collection and management law, I support the view that it is not applicable that the thirty-sixth section of the tax administration law is a general tax provision, while the third section of the Provisional Regulations on business tax and the detailed rules for the implementation of the Provisional Regulations on business tax are fifth special regulations on business tax.