If a company borrows funds and lends them to others without charging interest or charging low interest, the interest expense should be reduced.

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The National Taxation Bureau of the Northern Area （NTBNA）, MOF, stated that, if a company borrows money to pay interest on the one hand, but does not charge interest on the loan money on the other hand, or the interest charged is lower than the interest paid, according to the provisions of Article 97 of the Regulations Governing Assessment of Profit-seeking Enterprise Income Tax, the interest equivalent to the loan payment or the difference thereof shall not be recognized.

The Bureau explained using an example: Company A borrowed NT$280 million from financial institutions in 2021, with a borrowing interest rate of 2％, and reported interest expenses of NT$5.6 million in the profit-seeking enterprises income tax settlement declaration. After investigation, Company A loaned NT$7.9 million to Shareholder A in the same year without charging interest. According to regulations, the interest payment equivalent to the loan amount of NT$7.9 million should be reduced by NT$158,000（NT$7.9 million * 2％）.

The Bureau would like to specifically remind companies that if they borrow funds to pay interest and then lend the funds to others without charging interest or charging low interest, when handling the income tax settlement declaration for profit-seeking enterprises, they should reduce the interest expenses on their own in accordance with the law to avoid adjustment and tax repayment. If you have any questions, please visit the website of NTBNA（https://www.ntbna.gov.tw） to inquire about the relevant laws or call the toll-free service number 0800-000321 for detailed consultation services.

〔Contact person: Ms. Liu, Head, Profit-seeking Enterprise Income Tax Division.Tel. No. （03）3396789, Ext. 1340〕

Reference URL：https://www.mof.gov.tw/Eng/singlehtml/f48d641f159a4866b1d31c0916fbcc71?cntId=b423b38a96d34fff889022915d660066