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How is income tax calculated if the taxpayer gives a loan to his employee?
How is income tax calculated if the taxpayer gives a loan to his employee?
According to Articles 98.2 and 98.2.1 of the Tax Code, if a loan is given to an individual at an interest rate lower than the interest rate in the interbank loan auction - the amount to be paid in accordance with the interest rate in the interbank loan auction for this type of loans and the amount to be paid in accordance with the lower interest rate the difference amount is considered income related to salaried work.
To understand the requirements of the relevant articles of the Tax Code, let's explain our opinion on an example.
Example. The taxpayer gave a loan of 3,000 manats to his employee at an annual rate of 7 percent. The monthly report of the Central Bank of the Republic of Azerbaijan stated that the average annual interest rate on interbank loans was 9 percent in that month. In this case, the difference of 2 percent (9 percent - 7 percent) is multiplied by the amount of the loan given to the employee. The received 60 manats (3000 manats x 2 percent) is considered the employee's income and is added to the salary for that month. Let's assume that the employee's salary is 400 manats, then the mandatory payments for that month will be calculated not from 400 manats, but from 460 manats (400 manats + 60 manats).
According to Articles 98.2 and 98.2.1 of the Tax Code, if a loan is given to an individual at an interest rate lower than the interest rate in the interbank loan auction - the amount to be paid in accordance with the interest rate in the interbank loan auction for this type of loans and the amount to be paid in accordance with the lower interest rate the difference amount is considered income related to salaried work.
To understand the requirements of the relevant articles of the Tax Code, let's explain our opinion on an example.
Example. The taxpayer gave a loan of 3,000 manats to his employee at an annual rate of 7 percent. The monthly report of the Central Bank of the Republic of Azerbaijan stated that the average annual interest rate on interbank loans was 9 percent in that month. In this case, the difference of 2 percent (9 percent - 7 percent) is multiplied by the amount of the loan given to the employee. The received 60 manats (3000 manats x 2 percent) is considered the employee's income and is added to the salary for that month. Let's assume that the employee's salary is 400 manats, then the mandatory payments for that month will be calculated not from 400 manats, but from 460 manats (400 manats + 60 manats).