Changes in the taxation of borrowed funds

Taxation of borrowed money

The changes of the section 178 of the Tax Code of the Republic of Belarus (hereinafter – The Tax Code) came in force from the 1st of January, 2015. In restrained terms they provide for the income tax on loans and credits borrowed from individuals who are not self-employed entrepreneurs, foreign organizations not operating on the territory of the Republic of Belarus by means of permanent mission, and from foreign self-employed entrepreneurs.

The taxation of the loans and credits mentioned above is executed only if they are included in  the assets and income declaration provided by an individual as required by tax authority, or  they are specified in the commentary on income source provided as required by tax authority within the examination of demanded assets and income declarations.

Income tax is payable on the ground of the notice of assessment during a 30-day-period after its receiving at the rate of which is currently at 13 %.

In case of full loans and credits repayment, paid income tax can be offset or refunded to a person who paid it. The offset (refund) of income tax is exercised by tax authority where an individual is registered on the ground of his application and documents verifying full loans and credits repayment (refund) during a one month from the day of filing of an application for offset or refund.

However, in case of loans and credits repayment (refund) funded with the money coming from the mentioned persons on a repayable or conditionally repayable basis, income tax is not recalculated and cannot be refunded (offset).

It should be noted that income tax is not calculated on the basis of the amount of loans borrowed from the organizations and self-employed entrepreneurs – residents of the Republic of Belarus, and on the basis of the amount of credits borrowed from the Belarusian banks and nonbank financial intermediaries.

nbsp;            Take note:

nbsp;nbsp;           Tax authority does not calculate income tax on the basis of the amount of loans and credits if such loans and credits:

*borrowed from the persons nearly related: marital partners, parents (adoptive parents), children (including the adopted), sisters and brothers, grandparents, grandchildren, great grandparents, great grandchildren;

*borrowed from the persons nearly related to a marital partner: close relatives of a partner as well decedent’s;

*fully repaid (refunded) on condition that tax authority to be provided with documents verifying the fact of full loans and credits repayment (refund). In case of partial loans and credit repayment, the tax is calculated on the basis of the amount outstanding.

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