Running a business, along with the subsequent stages of its development, naturally requires further investment. Some expenses are sometimes difficult to cover with current funds, which makes it necessary to use financial assistance. Can loan installments be included in costs?
Thousands of Polish entrepreneurs can boast favorable results of their business activities every year. Many of these results would be impossible to achieve, if not for specific actions stimulating the systematic development of the company.
However, there are expenses that you do not want or can not cover with your current financial resources. In this situation, the most optimal solution is to take out a loan. However, this type of financial commitment is associated with additional costs.
How to take a loan for small business
The business loan includes standard costs, which do not differ much from those that affect ordinary consumer loans. The entrepreneur must pay fees related to commission and interest, and many buy additional insurance, which is another financial burden. Oak Park great for small busineess.
It is therefore not strange that just like when buying a company car or equipment, Polish entrepreneurs are baffled by the issue of the chance to minimize the costs associated with investing in the development of the company in terms of borrowing. It is worth answering the often-asked question – can loan installments be included in costs?
Including loan installments in costs – the legal basis
The answer to the aforementioned question will be to present the current relation of the right to corporate loans. More specifically, we are talking about the PIT Act (Article 23), which regulates the issue of tax-deductible costs.
We read there that the loan incurred for the needs of the enterprise does not cause the so-called tax income. This is not counted as a tax on goods and services as well as income tax.
The act also does not recognize expenses for the repayment of loans and credits as tax-deductible expenses. However, it treats only the capitalized interest on such liabilities as an exception.
Conditions for the inclusion of loan installments in costs
By gathering the above information together. You have to look at the loan installment with a distinction between its components. The amount itself, which is part of the loan itself, can not be included in the tax deductible costs. What else, however, in terms of capitalized interest, i.e. the cost of an additional loan. The same applies to commissions or the aforementioned loan insurance fees.
The abovementioned costs can be deducted when the first installment of the loan has not yet been repaid. Otherwise – these rules do not work backward. The already covered cost cannot be included in the cost.
The condition for including interest in tax-deductible costs is also the rule that a loan or loan should be made with absolute exclusivity for the company’s operations. The commitment must be made for revenue purposes or securing the source of its regular acquisition, which provides the company with financial liquidity.
Similarly, the law specifies the issue of insurance. They should be bought only to secure the loan, without taking into account the entrepreneur’s personal life (eg life insurance).
A loan for a company and a private property
It often happens that entrepreneurs locate the headquarters or the only office of their company in the real estate they own. Then, in the case of taking out a loan for the company’s activity, the law allows the possibility of including its costs in the income-generating costs in proportion to the space that the company occupies in the real estate.
If, let’s assume, it is a large room constituting 30% of the whole area of the real estate, exactly this amount of costs can be included in the costs of obtaining income in the enterprise. I am talking here about commission, interest and cost of loan insurance.
Exceptions to the rule
Interestingly, there are specific exceptions to this rule.
- The first exception is when a loan is provided, for example, privately between partners in a given company.
- The second exception is when the loan is taken out for an investment purpose.
In both situations, the option of including additional costs of a loan or loan (interest, commission, insurance cost) does not work. As a result, the entrepreneur must bear them on his own.
Summarizing the above information. Including the costs of credit or loans in the costs of obtaining income if these conditions are met is a noteworthy convenience for entrepreneurs who value the greatest possible relief of their own and the company’s budget. However, it is worth knowing not only the conditions, but also exceptions to the rule written in the law.