Many organizations periodically face the problem of lack of financial resources. The founder can help in solving this problem by lending money to the company, which the accounting service will issue as a loan.
What is a loan from the founder?
The founder can provide money to his company under a loan agreement, and then, as a lender, he has the right to release the debtor from his obligations to pay the debt. This process is called "debt forgiveness." This concept refers to the clearly and firmly expressed desire of the creditor to save the debtor from fulfilling obligations under the loan agreement. It should be remembered that the absence of claims on the part of the lender for the payment of a debt cannot be considered a will for the forgiveness of debt obligations. The creditor has the right to demand the performance of debt obligations, but is not obliged. Therefore, he may have a desire to refuse to pay the debt on the part of his company, if this does not affect the interests of third parties.
We will talk about how to carry out this procedure in accordance with the law. As well as how to reflect the forgiveness of debt by the founder in accounting and tax accounting.
Grounds
This process is carried out in accordance with the civil code of the Russian Federation. The rules of civil law regulate the forgiveness by the founder of the debt of his company. The article indicates the possibility of the creditor to release the debtor from obligations, but emphasizes that the debtor has the right not to accept such a proposal of the creditor, that is, this type of transaction is not unilateral. In case of refusal of the creditor to accept funds for payment of the debt, the debtor may deposit funds to the account of a court or a notary The founder has the right to forgive the debt of his company if this does not violate the rights of others. This category of persons includes, for example, creditors to whom the founder has debt obligations.
What else involves a debt forgiveness by the founder
Lenders may have questions about the possible recovery of the amount of debt carried out at the expense of the company's assets, one of which is this loan. The lender can express his will regarding the obligations of the debtor by sending an official postal notice, presenting a debt receipt or simply destroying the loan agreement from the founder.
There is an opportunity to formalize such a relationship as a settlement agreement, which is concluded in the course of executive office work. The debtor, as we have already said, has the right to refuse such a generous offer and forward his arguments to the creditor in writing. Otherwise, his obligations are deemed fulfilled. If agreed with the lender, the debtor also notifies him in writing. However, it is considered consent in this case, the failure to take any actions, regarded as objections. Debt can be forgiven in part or in full.
Legal procedure
In accordance with legal regulations, this process of forgiveness of debt by the founder can be executed using different methods. Let's consider them in more detail.
The first method is the execution of a donation contract in which the founder and the company themselves appear to be parties. The subject of the contract in this case is the amount transferred to the company in debt.This option of forgiving debt obligations is possible only if the founder is an individual. If he is in the status of a legal entity, then a donation agreement with another legal entity cannot be concluded.
What does the founder of a debt forgiveness contract imply?
Thus, under a gift agreement, all the rules and restrictions that apply to donations apply to the transaction. The transaction is concluded with the following conditions: on a voluntary basis, is not reimbursable in nature and does not imply the fulfillment of any conditions. The creditor does not have the right to determine special conditions for canceling the obligations of the debtor.
The next option is to conclude an additional agreement in which the parties will be the same participants. The subject of the contract is the lender’s refusal to claim debt from the borrowing company. This agreement will not allow you to cancel the debt, but will make it possible not to pay it, without fear of any legal consequences. The third method is the conclusion of such an agreement in which the subject is the exemption of the borrower from the amount of debt obligations (this is a document issued by the borrower to the lender upon receipt of the loan) determined by the loan agreement.
In this case, the text of the contract should contain a link to Art. 415 Civil Code of the Russian Federation. The fact of signing this agreement terminates all legal relations between the founder and the debtor company regarding the loan. Since this is an ordinary transaction, that is, general requirements for registration. When concluding a pardon agreement, certain rules must be observed. The contract must be made in simple writing. In order to avoid misunderstandings, the text of the contract should contain the amount of debt obligations that are written off. How to issue a debt forgiveness by the founder? This question interests many.
The lender and the debtor are also indicated with a list of data allowing identification of the parties to this agreement. The document must necessarily contain the details of the loan agreement, in respect of which a transaction is concluded on a partial or full write-off of debt. If the forgiveness of the debt by the founder is to be executed by means of a notice, then it indicates the period during which the debtor may express his objections to actions initiated by the creditor. If the debtor does not show any reaction to the notification of the creditor, its inaction is taken as consent.
This procedure does not end with the solution of casuistic problems: tax and accounting issues remain, since the company is a subject of economic relations and is obliged to make tax payments and maintain an accounting policy.
Tax accounting
As mentioned above, debt obligations are a kind of debt receipt issued to the lender by the borrower when applying for a loan. The document indicates the amount and period of return.
The method of tax accounting in this situation directly depends on what share in the authorized capital personally belongs to the founder. There are only two options, consider them in more detail. In the first case, the founder has 50% or less of the authorized capital of the company. Then, from the point of view of the tax authorities, the written-off debt is included in the organization’s revenue. In fact, the debt turns out to be property received by the company free of charge. That is, there is an increase in net assets.
It turns out that the amount of debt is included in the tax base of the company. If the lender has more than 50% of the authorized capital of the company, the situation is such that the amount of forgiven debt is not classified as income of the company. Therefore, this amount is not subject to taxation (Article 251 of the Tax Code). The legitimacy of applying this scheme of debt forgiveness is documented by the Ministry of Finance of the Russian Federation.It should be remembered that the payment of interest on the loan agreement of the company for any amount of ownership of the authorized capital is included in the tax base of the entity when writing off the debt.
Accounting
What are carried out at forgiveness of debt by the posting founder?
The accounting department of the company to which the founder wrote off the debt should reflect the write-off of the debt in the accounting records and make the appropriate entries in the registers (Credit 91, sub-account “Other income”; Debit 66 if the loan is short-term or Debit 67 if the loan is long-term). In the situation considered above, when the amount of debts written off does not apply to the tax base, the transaction is supplemented by another (Debit 68, subaccount "Calculations for tax"; Credit 99). This correspondence updates the company's asset, which is represented by unpaid tax on financial assets that the lender deducted.
Taxation
The amount that is entered in the first posting corresponds to the size of debt obligations. The one that is included in the second posting corresponds to the amount of the tax deduction, which is nominally charged on the debt. When using the general taxation system, this amount will be 20% of the amount of debt obligations. In the event that the founder owns less than 50% of the authorized capital of the company, the amount of debts will be reflected only in the first transaction. Recall that in this case, the consequences for the company are not formed in the form of taxes calculated for payment.
Redistribution of company funds
What does the founder of the debt forgiveness entail?
It is believed that execution of debt forgiveness is a complex operation that takes a lot of time and effort. However, this is not always the case. This procedure allows you to find a simple and affordable way to redistribute funds, for example, within the same holding. The benefit of giving a loan and debt forgiveness in this case is that the funds are distributed between the companies, while the debtor does not have income in case of forgiveness of debt by the founder with a 50% share in the authorized capital. When distributing money between companies that are members of the same group, they often use a loan agreement. We remind you once again that this method is advantageous when the founder giving the loan has a share in the authorized capital of 50 percent or less.
Determination of the rate in the loan agreement
However, issuing interest-free loans to subsidiaries is quite risky, as the lender must pay interest. Therefore, the rate in the loan agreement is still better to determine. This is also beneficial for the borrowing company, since interest on the loan reduces income tax. The founder then forgives the debt using an agreement. If the share of the founder in the authorized capital of the company is more than 50 percent, then the amount is not included in the tax base. An interest-free loan is money that is considered simply property received at no cost. It should be remembered that the condition relating to the founder must be relevant at the time the loan agreement was concluded.
What to look for?
It should be noted that tax inspectors insist that the amount of interest on debt forgiveness is included in the non-operating income of the debtor, since the organization received an amount corresponding to the size of the loan. That is, the founder did not pay interest, and the organization itself accrued and included in the costs. This operation cannot be considered a gratuitous transfer of property under the law, which means that it is also impossible to apply a tax exemption. Amount of forgiven debt is not included in tax expenses. These are unreasonable economic costs, according to the Ministry of Finance.
Conclusion
Thus, the creditor can write off the debt, expressing his goodwill, but the consent of the borrower is also necessary. It is also recommended to document the transaction and draw up an act of mutual settlements.The semantic load of the phrase "debt forgiveness" etymologically carries a favorable energy, but in practice means a lot of undesirable consequences. It can be financial losses and tax deductions of various kinds, we talked about them above. Therefore, resorting to the conclusion of such a transaction, it is necessary to weigh and take into account all the circumstances.