Basic provisions
Situations when an existing organization or a newly formed business needs cash injections are not uncommon.
But lending from banking institutions is not always advisable for a number of reasons:
- High interest rates.
- Probability of loan non-repayment.
- There is a high probability of failure of a financial organization if the company’s performance is unsatisfactory.
If a company urgently needs additional funds to pay for current expenses, expansion, or even out a difficult financial situation, its founder can come to its aid.
An interest-free loan is a voluntary lending of money by a business owner without charging interest for the use of financial resources.
Since the founder does not have any financial interest in the loan (profit), taxation bypasses such amounts of cash injections.
An interest-free loan is beneficial to both parties - the founder and the organization itself:
| The company receives the funds it needs | in full for the implementation of further actions without the need to pay interest and overpayments |
| The founder gets the opportunity to develop his business further | without having to pay tax (personal income tax) |
Despite the simplicity of the scheme, everything must be properly documented.
To do this, a loan agreement is concluded between the founder and the organization, which specifies:
| Total amount | and return period |
| Transfer method | After concluding the agreement, the founder can transfer the agreed amount of money to the company’s current account or deposit it in cash at the cash desk |
| Details of the parties | name, full name, address, telephone, INN, OGRN, KPP, BIC, account, etc. |
| Date of preparation | and grounds for termination of the contract, and signatures of the parties |
Transfer or deposit of money into the organization's cash desk must be made no later than the date specified in the agreement.
The legislative framework
The main legislative acts that must be referred to when concluding a document are:
| Civil Code of the Russian Federation | gives a definition of such borrowing, main characteristics, special opportunities (early repayment, etc.) |
| Tax Code of the Russian Federation | determines probable interpretations of this cash injection into the organization’s business reserves |
Existing types
Despite the fact that an interest-free loan from the founder has a main distinctive feature (no benefit for the owner of the enterprise or the meeting of its founders), there are several types of such borrowing:
| Non-target interest-free loan | The company's management notifies the founder of financial difficulties that have arisen and the need for cash injections, without focusing on what exactly the borrowed funds can be spent on. When preparing documents, it will be necessary to indicate, in addition to the mandatory items (details, conditions, responsibilities of the parties, etc.), only the amount and deadline for returning funds to the founder. It is also important to indicate that the loan is interest-free. If the debt agreement does not include a clause stating that there is no interest for the use of funds, such an agreement will automatically be calculated as a loan with interest (at the minimum refinancing rate) |
| Interest-free commodity | the founder has the opportunity to provide assistance to his company not only in monetary terms, but also in kind. For example, provide a loan in the form of raw materials, fuel, necessary equipment, etc. depending on your capabilities and the needs of the company. It is important to consider that under such an agreement the borrower undertakes to repay the loan with similar goods, therefore the documents must reflect:
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| Interest-free target | The founder has the right, when concluding an agreement, to determine the specific direction of borrowed funds. In this case, the following must be added to the main points of the agreement:
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The role of the controlling body is the lender (founder), who has the right at any time to demand evidence of the intended use of funds (delivery agreements, receipts, checks, payment orders, etc.).
The existence of various types of loans from the founder of the company allows companies to make appropriate choices in favor of high efficiency and rational use of funds or goods.
Features of loans
The main features of loans from the founder include:
| The need for a written contract | those who believe that they can simply transfer cash to their company without any documentary basis are deeply mistaken and are letting their accounting department down. According to Russian legislation (Civil Code of the Russian Federation, Article 16 clause 1), if one of the parties to the transaction is a legal entity, then it must be concluded in simple written form |
| Conclusion and termination of the agreement | It is important to take into account that the contractual relationship between the organization and the founder does not come into force from the moment of signing the papers, but only from the moment of the official transfer of money or other material assets (things, fuel, building materials, equipment, etc.). Thus, if an agreement has been signed on paper, but the organization has not yet received real property or money from its founder, then it is considered that the agreement has not yet been concluded. It is important to remember that the period for issuing an interest-free loan from the founder is necessarily specified in the document. The situation is similar with repayment - the debt is considered “repaid” at the moment of transfer of funds or goods to the lender |
| Applying for a loan from the founder-owner of the enterprise | if the loan is provided by the founder, who is also the director of the company, then he needs to sign the agreement twice - on his own behalf (as a lender) and on behalf of the company (as a director of the company). Such an action is not a violation of Russian law or fraud. The main thing is that there are official papers on appointment to the position and that they are reflected in the constituent documents of the company |
Video: LLC borrows money from the founder
Key points of the borrowing agreement
There are a number of points that are of particular importance for the tax consequences of a loan agreement with the founder. Among them is the ability to make an agreement:
- Provides for the payment of interest at a frequency convenient for its parties. The absence of reservations in this regard will require monthly interest accrual (clause 3 of Article 809 of the Civil Code of the Russian Federation).
- Interest-free (in the case of loaning things, the absence of interest becomes mandatory - clause 4 of Article 809 of the Civil Code of the Russian Federation). In order for an agreement to be considered interest-free, the condition of non-accrual of interest must be fixed in the text of the document, since the absence of such a condition will entail the need to calculate interest on the key rate of the Bank of Russia (clause 1 of Article 809 of the Civil Code of the Russian Federation).
- Targeted. For this situation, the contract will have to provide for a procedure for monitoring the use of what was loaned and a procedure for returning it if misuse is identified (Article 814 of the Civil Code of the Russian Federation). Accordingly, interest accrued on borrowed funds used for other purposes will not be taken into account to reduce the tax base for profits or the simplified tax system; It will also be impossible to take into account the negative exchange rate difference on a loan issued by a foreign founder in foreign currency.
- Does not contain an indication of the repayment period or makes it dependent on the moment of reclaiming the loan from the lender. Under such conditions, the debt must be repaid no later than the 30th day from the date of the demand from the lender, unless a different period is specified in the text of the agreement (clause 1 of Article 810 of the Civil Code of the Russian Federation). Moreover, the date of return (unless otherwise provided by the agreement) will be considered the day of actual receipt of the debt by the lender (clause 3 of Article 810 of the Civil Code of the Russian Federation).
In order to avoid undesirable consequences, it is recommended to stipulate each of the listed points in detail in the text of the loan agreement.
Interest-free loan from the LLC founder
The founder of an LLC is most often one of the immediate superiors of the organization, and therefore has a personal interest in the full support of his “brainchild”.
Funds or property transferred to the organization by its owner under a loan agreement must be returned, therefore they are not recognized as income of the LLC and are not subject to taxes.
This is a very important nuance, because such contractual agreements can involve significant sums of money.
If they are considered as profit of the enterprise and included in the tax base, then such a loan can become a heavy financial burden for the company. With this approach, a regular bank loan at 15-25% per annum will be the most profitable solution to the problem.
It is also important to consider that the founder-owner of the LLC has the right not to demand its return, that is, to forgive.
The unreturned amount of debt is defined as non-operating income of the enterprise, but is also not subject to taxation if the founder-lender has a share of more than 50% in the company (Tax Code of the Russian Federation, Art. 251).
Tax consequences between independent legal entities
If the lender has existing microloans or reimbursable loans, that is, he pays interest for using them, then tax officials may consider accepting interest as an expense illegal, due to the fact that the loan funds were used to issue an interest-free loan to another company. But such decisions of the tax authority must be challenged. This procedure is carried out in court. In this case, the lender must prove that the existing loan was used for other purposes and in no way relates to the microloan issued to another organization. A microloan is the company’s own funds.
Tax consequences and risks
An organization that has received an interest-free loan from the founder will not pay taxes on the funds received if the founder has a stake in the authorized capital of the organization exceeding 50%.
In this case, it does not matter at all who the lender is - a legal entity or an individual.
Money received under a loan is subject to income tax in the following cases:
- the founder's share in the authorized capital is less than 50%;
- The founder's share in the authorized capital is 50%.
If the founder of the company is an individual, he will also be required to pay tax contributions.
An interest-free loan is a real help for the founder of his company. This cash injection or material support with goods helps the business not only stay afloat, but also develop.
The main thing is to take into account all the nuances so that financial assistance does not turn into an unaffordable tax burden for both parties to the agreement.
Essence
Interest-free loans are a common phenomenon among Russian business entities. Interdependent legal entities enter into such transactions to redistribute funds among themselves. Often, interest-free loans are provided by organizations independent of each other.
In accordance with the Civil Code of the Russian Federation, a loan agreement involves the transfer of money or property to the borrower with the subsequent return of the received funds or material object to the lender.
Article 809 of the Civil Code outlines the conditions under which a loan can be considered interest-free:
- The transaction was concluded between individuals for an amount up to 50 times the minimum wage and is not related to the commercial activities of the participants;
- The contract involves the transfer of things defined by generic characteristics.
A loan agreement is gratuitous if it is not related to entrepreneurial activity. Such transactions have the right to exist, but one party must prove that they are not pursuing commercial gain.
Under an interest-free loan agreement, the borrower returns to the lender only the amount specified in the terms of the agreement. Payments are made in installments or in a lump sum.
A gratuitous loan allows for early repayment of the debt, since the transaction does not bring profit to the lender. However, once the money is paid, the legal obligations of the parties do not end until taxes are credited to the budget. The legal entity-lender does not pay tax, since the issuance of a gratuitous loan does not bring benefit to it.
Is it profitable for the founder to borrow from his company?
At first glance, yes, it’s profitable. You can take it without interest and return it whenever you want, or you can even draw up an agreement without specifying a specific return period. And since the founder is often the head of the company, no one demands this debt from him.
The tax office, in turn, cannot indicate under what conditions such a loan will be provided. But it has the power to collect personal income tax from the founder. It is important to consider the concept of material benefit here.
A material benefit arises if the loan is issued at a rate that is less than 2/3 of the refinancing rate. In this case, the founder will be forced to pay 35% of the amount of material benefits every month.
Previously, recipients of interest-free loans avoided these payments, because... by law they are required to be remitted at the time of interest payment. And since no interest is paid on an interest-free loan, there is no day on which the founder must pay personal income tax on material benefits.
However, after changes in tax legislation, the obligation to pay personal income tax also arises for interest-free loans. However, there remains the opportunity to forgive the debt - then the founder will still pay personal income tax, but at a rate of 13%.
Peculiarities
A loan agreement between legal entities (interest-free) can be repaid ahead of schedule. These operations do not affect the profitability of the transaction: commissions are still not charged. Therefore, the lender is primarily interested in such a scheme. But even after paying off the debt, the relationship between the participants does not end. They have to pay the fees. Let's take a closer look at the tax consequences of an interest-free loan between legal entities.
According to the Federal Tax Service, borrowing relationships can be qualified as the provision of financial services. But there is no charge for them. Tax authorities classify an interest-free loan as non-operating income in the form of property rights or services (Article 250 of the Tax Code). The economic benefit is assessed at the Central Bank refinancing rate on the day the interest-free loan is repaid.
What you need to know
Situations when an organization needs cash injections are by no means uncommon. The first thing that comes to mind is applying for a bank loan.
However, contacting credit organizations is not always advisable. In particular, there are:
| High interest | Often overlapping the benefits of lending |
| Probability of a problem loan | Since the success of the loaned project cannot be confidently guaranteed |
| Risk of refusal of financing | On the part of the banking institution, if the company’s activities are accompanied by unsatisfactory performance |
When a company urgently needs financial assistance to stabilize its financial condition or pay for current expenses, the founder has the right to provide support.
Among the main features of an LLC receiving a loan from the founder, the following points can be noted:
| Necessity of a written contract | The lack of documentation is a violation of the law, since the Civil Code of the Russian Federation (Article 16, paragraph 1) states that any transaction must be formalized in writing if one of the participants is a legal entity |
| Confirmation of the agreement | Contractual relations begin not after signing the agreement, but from the moment of direct transfer of the subject of the agreement. A similar rule applies to the completion of a transaction. |
| Applying for a loan from the founder-director | If lending to an LLC is carried out by the founder, who is also acting as the general director, then the agreement is also required. The nuance is that the same person signs the agreement twice - as a borrower and as a lender |
Issuance of funds to individual entrepreneurs
Under the terms of the agreement, the borrower receives some things or funds and undertakes to return them upon expiration of the term. A loan is considered interest-free if:
- The amount provided does not exceed 50 times the minimum wage.
- One of the parties to the transaction is not engaged in economic activity. You can provide a document confirming that the creditor transferred funds under the agreement that he received, for example, from the sale of property.
- The borrower receives valuables with certain generic characteristics.
The tax consequences of an interest-free loan between legal entities may not occur at all if at least the minimum rate for the use of funds is assigned in the document. You can conclude an additional agreement and stipulate in it that by the time the money is returned, the borrower will have to pay, for example, 1% per annum.
Registration procedure
If a participant in an LLC lends money to his organization, then the company and the founder find themselves in a borrowing relationship.
The amount allowed for transfer is not limited by law. There are no restrictions on the size of the participant’s share in the authorized capital.
The legal relations of the parties are necessarily formalized by an agreement. Sometimes the parties are limited to documents confirming the transfer (cash receipt order, payment order).
In the absence of a formal agreement, there is a high risk of non-recognition of the loan relationship in the event of litigation.
How to draw up a loan agreement from the founder of an LLC
Like any similar agreement, an LLC loan agreement from the founder may include any terms that the parties see fit to specify.
But at the same time, the following conditions must be present in the contract:
| Data of transaction participants | — |
| Date and place | Drawing up a contract |
| Loan size | The amount is not limited and depends solely on the capabilities of the parties |
| Return period | The contract can be short-term (up to one year), long-term (more than a year), or unlimited. If the exact date is not specified, then the transaction is recognized as unlimited and the debt is repaid at the request of the lender |
| Return procedure | Here you can specify a condition for the return of the entire debt amount upon expiration of the term or stipulate the procedure for returning funds in installments (for each payment the amount and term are indicated) |
| Purpose of the loan | The intended purpose can be indicated in general terms or in the form of a specific goal. The procedure for control on the part of the founder must be specified. For example, relevant expense documents or reporting, etc. are provided. |
| Procedure for interest calculations | The rate, calculation option and payments are prescribed (monthly, at the end of the term). The absence of interest may also be indicated. |
The last point regarding interest is usually fundamental. And it is the provision regarding interest charges that raises the most questions. What rate to apply, what taxes to pay, etc.
Percentage
By default, any loan agreement is considered interest-bearing. The rate in this case is calculated based on the refinancing rate of the Central Bank of the Russian Federation on the date of debt repayment.
Interest payments are made monthly. In order for the interest clause not to apply, it is necessary to stipulate in the agreement that interest will not be charged.
But if an interest-bearing loan agreement is concluded, the rate is determined by the parties themselves. Moreover, the interest payment period can be any.
The contract must specify the following conditions:
- loan rate;
- accrual procedure;
- payment procedure and deadline.
It is also possible to indicate the measures applicable to the borrower in case of delay in payments. For example, levying a fine or interest.
Interest-free
Can a founder provide an interest-free loan to an LLC? A participant can lend money to an LLC without charging interest on the use of funds.
This option is convenient because the transaction is not subject to taxation. The company receives the necessary funds for a time without having to pay interest.
And the participant gets the opportunity to develop the business and is exempt from having to pay personal income tax.
The main condition of an interest-free loan agreement is an indication that there are no interest charges.
It should be clear from the contents of the agreement that the funds are provided for free use.
The agreement also specifies methods for depositing funds. You can do this:
- transferring funds to a current account;
- depositing cash into the company's cash register.
How to apply for a loan?
When applying for a loan, it is necessary to take into account the basic requirements imposed by civil law on loan agreements. The agreement specifies the loan amount, currency, procedure and terms of repayment. If the loan is taken in kind, a list of things is drawn up. Upon issuance of a loan in cash, financial documents are drawn up in the form of receipts, acts of acceptance and transfer of funds.
Necessary documents for drawing up a loan agreement:
- certificate of registration of the Unified State Register of Legal Entities;
- document confirming the powers of the General Director (Charter, order of appointment);
- details of the parties.
How to draw up a contract? The agreement is concluded in writing. Each party receives a separate copy, certified by the seals and signatures of the parties. The condition that the transaction is free of charge is indicated in the text.
A sample agreement is provided by legal reference services. When drawing up, this template can be taken as a basis and include individual characteristics inherent in a given transaction. The text must not contradict current legislation. The agreement includes the following items:
- names of the parties;
- subject of the contract;
- rights, duties and responsibilities of the parties;
- validity of the contract under force majeure circumstances;
- methods of resolving disputes;
- addresses and details of the parties.
Consequences of non-return
The creditor has the right to demand the return of funds through the court within three years from the day following the return date specified in the contract. If the loan term is 5 years, then the litigation can last up to 8 years. Only after this period can the accounts payable be written off and its amount included in the base for calculating the NPP.
If the borrower sends letters to the creditor every 3 years following the expiration date with a willingness to repay the debt, then the statute of limitations will never expire.
In order not to take into account the amount of unreturned funds as part of taxable income, you need to:
- set a maximum loan repayment period;
- after its occurrence and after 2 years and 11 months, send a letter acknowledging the debt to the lender by mail with acknowledgment of delivery.
