S.V. Razgulin,
Acting State Councilor of the Russian Federation, 3rd class
Order tax accounting interest on loans and borrowings allows taxpayers to account for the entire amount of interest in expenses. However, for controlled transactions, not only the amount of expenses, but also the amount of income in the form of interest for tax purposes can be adjusted. In addition, interest-free loans, deposits with negative rates, as well as situations in which there are legal interest. These questions are discussed in an interview with an expert.
- What approaches are provided by the Tax Code for accounting for interest on debt obligations in expenses?
Debt obligations are loans, including commodity and commercial, loans, bank deposits, bank accounts, other borrowings. The way they are designed, for example, securities, doesn't matter.
Subparagraph 2 of paragraph 1 of Article 265 of the Tax Code of the Russian Federation classifies expenses in the form of interest on debt obligations as non-operating expenses. An expense is the amount of interest accrued for the actual time of using the borrowed funds and the initial yield established by the issuer (lender) in the terms of the issue (issue, agreement), but not higher than the actual one.
Any pre-declared (established) income, including in the form of a discount, is recognized as interest on a debt obligation.
Features of interest accounting are regulated by Article 269 of the Tax Code of the Russian Federation, tax accounting of interest - by Article 328 of the Tax Code of the Russian Federation.
- If a fixed asset is purchased on credit, how are the interest on such a loan reflected?
Interest on debt obligations of any kind, including loans issued for the acquisition (creation) of property, is reflected in tax accounting as non-operating expenses. The nature of the granted credit or loan (current or investment) does not affect the interest accounting procedure.
Does the procedure for their payment, established by the contract, affect the accounting for interest in expenses? For example, if the payment of interest is provided simultaneously with the return of the principal amount of the debt at the end of the contract.
Paragraph 8 of Article 272 of the Tax Code of the Russian Federation expressly prescribes that interest be included in expenses at the end of each month of the corresponding reporting (tax) period.
In the event of termination of the agreement (repayment of a debt obligation) within a calendar month, interest is included in expenses as of the date of termination of the agreement (repayment of a debt obligation).
Accordingly, paragraph 6 of Article 271 of the Tax Code of the Russian Federation provides that, regardless of the payment terms provided for by a loan agreement or other similar agreement, the validity of which falls on more than one reporting (tax) period, income under such agreements is recognized as received and included in income at the end of every month.
The rules for tax accounting for income (expenses) in the form of interest, contained in paragraph 4 of Article 328 of the Tax Code of the Russian Federation, also require that income (expenses) in the form of interest on debt obligations be recognized by the taxpayer, who determines income (expenses) on an accrual basis, on a monthly basis.
In analytical accounting, the amount of interest is reflected in income (expenses) on the basis of certificates responsible person who is entrusted with keeping records of income (expenses) on debt obligations.
Thus, if the debt obligation itself provides for the accrual of interest, then regardless of the fact that the term for their payment can be attributed by the contract to the end of such an obligation, interest is subject to monthly accounting in the income of the lender (creditor) and expenses of the borrower (debtor).
As an exception, the interest accrued on the amount of claims of the bankruptcy creditor in accordance with the legislation on insolvency (bankruptcy) is directly named. They are recognized as expenses on the date of transfer of funds from the current account (payment from the cash desk). In income, such interest is taken into account on the date of their receipt.
If, according to the agreement, the early termination of the loan entails a revision of the interest rate for the past period, what is the procedure for accounting for interest in this case?
It is necessary to clarify income, expenses in the form of accrued interest in the period in which the early termination of the contract occurred. The occurrence of such income or expenses is not an error or misrepresentation in the calculation tax base and is reflected for income tax purposes as part of non-operating income or expenses of the reporting period in which they were incurred.
In particular, for a creditor, when the rate is reduced, this means that the difference between the amount of interest accrued at the original rate and the amount of interest actually paid at the rate provided for in the event of early termination is reflected in non-operating income (letter of the Ministry of Finance of Russia dated May 16, 2013 No. 03-03 -06/2/17017).
- How much interest is taken into account for taxation?
By general rule, income (expense) is recognized as interest calculated on the basis of the actual rate established by the debt obligation. The following principle applies to transactions that are not recognized as controlled - the interest applied in transactions is recognized as a market rate and is attributed to the income (expenses) of the parties to the transactions. This procedure applies to transactions, regardless of the date of their conclusion, the income (expenses) for which are recognized starting from 2015.
- For which debt obligations income (expenses) in the form of interest can be adjusted?
Adjustment is possible for controlled transactions, that is, primarily in transactions between interdependent persons. In such transactions, income (expense) is recognized as interest calculated on the basis of the actual rate, taking into account the norms of the Tax Code of the Russian Federation on tax control for transfer pricing.
Between Russian organizations- related parties have entered into a loan agreement. At the same time, transactions between these persons are not classified as controlled. Is it possible to recognize interest under such an agreement in income / expenses in the actual amount?
A transaction between related parties, the place of registration, or the place of tax residence of all parties and beneficiaries in which is Russian Federation, is recognized as controlled in the presence of the circumstances specified in Article 105.14 of the Tax Code of the Russian Federation. In particular, the amount of income from transactions between these parties for the calendar year should exceed 1 billion rubles.
Interest on a transaction between related parties, which is not recognized as controlled, is recognized in income and expenses based on the actual interest rate.
- But how to determine at the beginning of the year whether the transaction will be recognized as controlled?
When the party to the transaction is known, and not only when issuing a loan, but also when acquiring bonds, promissory notes of third-party issuers, it is necessary to analyze the presence of interdependence relations. As regards own bills, evaluation may take place at the time of their placement and redemption.
correct interest income(expenses) accounted for prior to the recognition of the transaction as controlled is not required, except for cases when the conditions of clauses 1 or 2 of Article 105.14 of the Tax Code of the Russian Federation were met in the relations of the parties at the time of the transactions.
Transfer pricing rules may not apply if the interest on a controlled transaction is within a safe interval?
Yes. There are ranges of rates within which interest can be recognized in expenses (income) without special justification.
According to paragraph 1.1 of Article 269 of the Tax Code of the Russian Federation, in controlled transactions, the taxpayer has the right to:
Recognize income at the actual rate if this rate is greater than the minimum value of the interval;
Recognize expense at actual rate if that rate is less than the maximum value of the interval.
Clause 1.2 of Article 269 of the Tax Code of the Russian Federation in the intervals used rates in relation to the currency of obligations: key rate Central Bank, rate LIBOR, EURIBOR, SHIBOR.
Please note that when calculating, the currency from the rate interval is used, at the rate of which payments are calculated according to the agreement (letter of the Ministry of Finance of Russia dated 03.09.2015 No. 03-03-06/1/50811). In other words, if interest is accrued on an amount in euros, expressed in euros, but paid in rubles, the interest interval from EURIBOR +4% to EURIBOR +7% is used.
Since 2016, the interval indicators for a debt obligation issued in rubles and arising as a result of transactions recognized as controlled are from 75 to 125% key rate Central Bank. The phrase "up to 125%" allows an interpretation according to which the calculation of the maximum limit should be made on the basis of 124.99%, and not 125%.
- What rate is considered as a fixed, floating interest rate?
A fixed rate is understood as a payment condition, which is indicated as a number (for example, “12%”) for the entire term of the contract.
The rate is not considered fixed if several rates are included (by periods), the right of one of the parties to unilaterally revise the interest rate is provided.
The wordings in the contract (for example, “20% for the first 2 months, then - 18% for each subsequent month”, “LIBOR rate minus 0.2%”, etc.) for the purposes of Article 269 of the Tax Code of the Russian Federation are considered as floating terms interest rate.
If the rate on a debt obligation resulting from a controlled transaction is floating, then the range of limit values of interest rates is calculated based on the value of an indicator, for example, the key rate in force on the date of recognition of income (expenses) in the form of interest. That is, at the end of each month of the reporting (tax) period and on the date of termination of the contract (repayment of the debt obligation).
When changing the interval rate in a certain month new rate applied to expenses for the whole of such month. For example, for March 2018, based on the key rate of the Central Bank, equal to 7.25%, established since March 26.
On what date is the rate used in the calculation of the "safe" interval determined for a loan with a fixed rate?
With regard to debt obligations, for which the rate is fixed and does not change during the entire term of the debt obligation, the rate of the Central Bank (LIBOR, EURIBOR, SHIBOR rate) means the corresponding rate that was in effect on the date of raising funds or other property in the form of a debt obligation .
Effective June 1, 2018 new edition articles of the Civil Code of the Russian Federation on loans and credits ( the federal law dated July 26, 2017 No. 212-FZ). In particular, in order to recognize a loan (credit) agreement concluded between legal entities, the transfer of money or other things may not be required (Article 807 of the Civil Code of the Russian Federation).
At the same time, the “date of attraction (provision) of funds” can be understood as the date of actual crediting of credit funds to the borrower's account. As a rule, the date of conclusion of the contract and the date of attraction (provision) of funds do not coincide.
How is the term of a debt obligation calculated for the purposes of determining base rate LIBOR-EURIBOR-SHIBOR for debt obligations placed in tranches?
According to subparagraph 3 of paragraph 1.3 of Article 269 of the Tax Code of the Russian Federation, for the purposes of calculating the intervals for limiting interest rates, the LIBOR-EURIBOR-SHIBOR rate that is most appropriate for the term of the debt obligation should be applied.
Letter No. 03-03-06/1/16569 dated March 24, 2016 of the Ministry of Finance of Russia states that each new tranche, during which funds are transferred to the borrower, must be considered as a debt obligation that has arisen.
For debt obligations placed in tranches, the term of the debt obligation will be the planned term of placement of a particular tranche, and for redeemed - the actual term of placement of a particular tranche. In case of delay in repayment, up to the moment of actual repayment, the term of the debt obligation is determined by the planned term, since the delay in payment should not be considered as an error in applying the rate established on the basis of the original term of the debt obligation. After repayment, the term is determined by the actual term.
- What are the consequences if the interval is not observed?
By themselves, interval values are not equivalent to market rates. If the interest has gone beyond the interval, then to determine income (expense), not the maximum (minimum) value of the interval is taken, but market rates calculated using pricing methods for related parties.
Expenses for the payment of interest in excess of the established limits cannot be taken into account (paragraph 8 of Article 270 of the Tax Code of the Russian Federation).
- What method is used to set the market rate of interest?
The preferred pricing method for transactions between related parties is the comparable market price method. The search for comparable transactions (debt obligations) is carried out based on the currency, terms, volumes, methods of security. Commercial and/or financial conditions that affect the interest rate. For example, credit history, solvency, procedure for determining the interest rate (fixed or floating), economic comparability of the operating conditions of the parties, including characteristics of the markets, commercial strategies of the parties.
To assess the comparability of debt obligations, one can use information on debt obligations to which the taxpayer is a party (information on attracted and issued obligations), information on the terms of similar debt obligations of third parties (if such information is available).
- Can a deal to provide an interest-free loan be subject to control?
A potential risk is possible if we are talking about periods up to 2017 in transactions between related parties (letter of the Ministry of Finance of Russia dated 05.10.2012 No. 03-01-18 / 7-137).
Since 2017, transactions for the provision of interest-free loans between related parties, the place of registration or the place of residence of all parties and beneficiaries in which the Russian Federation is, are not recognized as controlled (subparagraph 7 of paragraph 4 of Article 105.14 of the Tax Code of the Russian Federation). This rule applies regardless of the date of conclusion of the contract (supplementary agreement thereto), under which these transactions are carried out (letter of the Federal Tax Service of Russia dated April 13, 2017 No. ED-4-13/6968@).
Check if the price applied in these transactions is consistent, market prices, the Federal Tax Service is not entitled.
The provisions of Article 269 of the Tax Code of the Russian Federation on the range of interest rate limits on controlled debt obligations also do not apply to interest-free loans.
In addition, the “material benefit” received by the organization from the use of an interest-free loan is not determined. Chapter 25 of the Tax Code of the Russian Federation does not provide for the accounting of such income for income tax purposes. This position is confirmed by the letter of the Ministry of Finance of Russia dated March 23, 2017 No. 03-03-RZ / 16846.
- Do tax risks remain when issuing interest-free loans?
Funds received under a loan agreement are not taken into account when determining the tax base in income / expenses (Articles 251, 270 of the Tax Code of the Russian Federation). Only interest is recognized as income/expense under a loan agreement. At a rate of 0%, no income/expenses arise.
But the issuance of an interest-free loan, as a general rule, is not associated with activities aimed at generating income.
When determining the tax base, expenses in the form of the value of property transferred free of charge (works, services, property rights) and expenses associated with such a transfer (clause 16 of Article 270 of the Tax Code of the Russian Federation) are not taken into account. Therefore, accounting for taxation of related expenses, for example, bank commissions for transferring an interest-free loan, carries the risk of claims by the tax authority for such expenses as not meeting the requirements established by Article 252 of the Tax Code of the Russian Federation.
When providing interest-free loans or loans with a minimum rate, it should be remembered that if the source of loan funds is loan funds, and the amount of interest on the loan will be lower than on the loan, this may lead to a refusal to accept the lender's expenses for paying interest to the bank as economically unjustified.
- Do tax risks remain when accounting for interest on transactions that are not classified as controlled?
Since 2015, Article 269 of the Tax Code of the Russian Federation applies not only to expenses, but also to income.
It is necessary to comply with the requirements of Article 252 of the Tax Code of the Russian Federation on the economic feasibility and documentary evidence of interest expenses. In particular, interest expenses must be related to activities aimed at generating income.
The tax authority may refuse to reduce the tax base due to violations by the taxpayer of Article 54.1 of the Tax Code of the Russian Federation. The absence of the transaction itself or the absence of a business purpose in it, in the opinion of the tax authority, may be indicated by long loan terms (repeated extensions of terms), accompanied by non-payment of interest on the loan (lack of repayment requirements). As a rule, in these cases there is an interdependence between the creditor and the debtor (Definition Supreme Court RF dated August 16, 2017 No. 310-KG17-10276).
The Tax Code also provides that when income, including interest, is paid in favor of foreign organization tax agent for the purposes of applying international treaties, it is necessary to establish the actual recipient (owner) of income.
It should be noted here that, according to the revised position of the Ministry of Finance, the income of foreign banks from placements with them Russian persons funds at negative interest rates are classified as income from entrepreneurial activity(Letter No. 03-08-05/3288 dated January 23, 2018). This means that these incomes are not subject to taxation in Russia (provided there is no permanent establishment foreign bank on Russian territory).
- How are they accounted for? additional commissions associated with a loan?
In addition to paying interest, the borrower is obliged to pay other payments provided for in the loan agreement, including those related to the provision of a loan. The types of such commissions in practice are the commission (fee) for opening credit line, for the reservation, for the right early repayment and others.
Commissions on debt obligations can be taken into account in taxation on an independent basis: as expenses for banking services.
The moment of rendering the service depends on the terms of the contract. In particular, the commission for early repayment of debt on a loan will be recognized in tax accounting at a time at the time the service is provided (the date of early repayment). The commission for the issuance of each tranche of the loan is taken into account at a time on the date of the service - the provision of the tranche of the loan. The date of recognition in income of the commission for opening a credit line may be the date of conclusion of the agreement / date of issue of the loan.
But it is necessary to analyze the procedure for calculating the commission, including the relationship with the size of the debt obligation, not only from the point of view of a uniform or one-time accounting procedure, but also for the possible reclassification of the commission into interest.
- What is the interest provided for in Article 317.1 of the Civil Code of the Russian Federation?
In accordance with the original wording of paragraph 1 of Article 317.1 of the Civil Code of the Russian Federation, unless otherwise provided by law or contract, the creditor under a monetary obligation had the right to receive interest from the debtor on the amount of debt for the period of use in cash("legitimate" interest).
Use of the creditor's funds arising in connection with the performance monetary obligation by the debtor at a later date than the creditor fulfilled the counter obligation to supply an asset (render a service, etc.), was recognized as paid. And legal interest was accrued as such a fee (paragraph 53 of the Resolution of the Plenum of the Supreme Court of the Russian Federation of March 24, 2016 No. 7).
Article 317.1 of the Civil Code of the Russian Federation applied to contracts concluded on June 1, 2015. In order to avoid the accrual of interest, the agreement included provisions on the non-application of the norms of Article 317.1 of the Civil Code of the Russian Federation.
From August 1, 2016, the new wording of paragraph 1 of Article 317.1 of the Civil Code of the Russian Federation provides for the calculation of legal interest only if this is provided for by law or an agreement. The amount of interest is determined by the key rate of the Bank of Russia in force in the relevant periods, unless a different amount of interest is provided for by law or an agreement. Thus, in contracts concluded from August 1, 2016, the condition on non-accrual of interest under Article 317.1 of the Civil Code of the Russian Federation can be omitted.
"Legal" interest is not a fine, thus, the simultaneous application of interest under Article 317.1 of the Civil Code of the Russian Federation and a penalty, interest under Article 317.1 of the Civil Code of the Russian Federation and interest under Article 395 of the Civil Code of the Russian Federation is allowed.
If we follow the position of the Ministry of Finance (letter dated 09.12.2015 No. 03-03-Р3 / 67486), then legal interest is reflected in the income / expenses of the organization according to the general rule for accounting for interest income / expenses on debt obligations (at the end of each month and on the date of termination of the obligation ).
The accountant often has to calculate the amount of interest for the use of borrowed funds. And here it is important to correctly calculate the number of days for which the payment for the use of money is charged. Not only to avoid disputes between the parties. This calculation depends tax issues- accounting for the amount of interest in "profitable" income (expenses) and withholding personal income tax with income in the form material gain(if the loan is issued to an individual).
Often, accountants have difficulty determining the first and last day of the borrowing period. Let's figure out what these days are.
First day
Let us make a reservation right away that the parties have the right to determine any procedure for calculating interest for the use of a loan. paragraph 1 of Art. 809 of the Civil Code of the Russian Federation. Look at your contract - if it clearly states from which day to which day to count, then act in accordance with the provisions of this document. But, as a rule, only the interest rate and the repayment period of the loan are indicated in the contracts. Therefore, in other matters it is necessary to be guided by general rules.
The loan agreement is considered concluded from the moment the money is transferred paragraph 1 of Art. 807 of the Civil Code of the Russian Federation. But it is not necessary to take into account this day for the purposes of calculating interest, since, according to the general rule of the Civil Code, the period certain period time, begins on the next day after the calendar date or the occurrence of the event that determined its beginning about Art. 191 of the Civil Code of the Russian Federation. Thus, unless the contract says otherwise, interest must always be accrued from the day following the day of transfer (transfer) of money.
This moment is especially important when the date of receipt of the loan and the day of the beginning of interest calculation fall on different months. Suppose an employee was issued an interest-free loan on 03/31/2016. According to the rules effective from 01/01/2016, income in the form of profit from savings on interest arises on the last day of each month during the period of using the loan. sub. 7 p. 1 art. 223 of the Tax Code of the Russian Federation. Since, according to the Civil Code, the term for using a loan must be counted from 04/01/2016, it is not necessary to calculate the maturity and withhold personal income tax from it for March.
Last day
As for the last day, everything is somewhat more complicated.
As stated in the Civil Code, unless otherwise agreed, interest is paid monthly 'til the day repayment of the loan amount paragraph 2 of Art. 809 of the Civil Code of the Russian Federation. The preposition "to" from the point of view of the Russian language is perceived rather as an indication not to include the day of return. At least, according to Ozhegov's dictionary, "before" indicates the limit of something, in the sense of "before something" Ozhegov S.I., Shvedova N.Yu. Explanatory dictionary of the Russian language: 80,000 words and phraseological expressions. M.: Azbukovnik, 1999. S. 168.
At the same time, another provision of the Civil Code, which deals with the early repayment of a loan, refers to the calculation of interest "inclusive until the day the loan amount is repaid in full or in part" paragraph 4 of Art. 809 of the Civil Code of the Russian Federation. Here it is already obvious that the last day is included. A different rules there can be no calculation of interest for early and for regular loan repayment. Since the rule on the early return procedure was introduced later, it can be assumed that the legislator deliberately clarified the wording in order to avoid disputes.
Note that the documents of the Central Bank regarding loans of the Bank of Russia also require interest to be charged up to the day the loan is repaid, inclusive. clause 2.1 of the general loan agreement (Appendix 1 to the Regulation, approved by the Central Bank on November 12, 2007 No. 312-P); clause 3.14 of the Regulations, approved. Central Bank 04.08.2003 No. 236-P; clause 2.2 of the Order of the Central Bank of November 30, 2015 No. OD-3381; clause 6.1 of the Order of the Central Bank dated 15.01.2014 No. OD-18; clause 2.7 of the Order of the Central Bank dated April 17, 2013 No. OD-194. The Central Bank has the right to determine its own procedure for calculating interest in paragraph 1 of Art. 809 of the Civil Code of the Russian Federation; Art. 40 of the Law of July 10, 2002 No. 86-FZ, it cannot be considered as a general rule. However, the position of the Central Bank can be seen as an example of a common approach.
We turned to an expert in civil law for advice on this issue, and this is what they explained to us.
FROM AUTHENTIC SOURCES
Supreme Judge arbitration court Russian Federation, retired, Associate Professor of the Russian state university justice, k. yu. n.
“According to paragraph 2 of Art. 809 of the Civil Code of the Russian Federation, interest under the loan agreement is paid monthly until the day the loan amount is returned. I believe that in the absence of conditions on the procedure for calculating interest in the agreement itself, interest is accrued from the day following the day the loan is issued, and until the day the loan is repaid, inclusive.
Since the calculation of interest affects tax issues, we also decided to ask the opinion of the representative of the Ministry of Finance. It turned out to be the same.
FROM AUTHENTIC SOURCES
Counselor of the State Civil Service of the Russian Federation, 1st class
“The accrual of interest under a loan (credit) agreement in the absence of a condition on the procedure for their calculation in the loan agreement itself is carried out according to the formula simple interest for the period from the day following the day of granting a loan (credit) to the day of repayment of the loan inclusive, for each calendar day based on the number of calendar days in a year (365 or 366 days, respectively). The date of granting a loan (credit) is not taken into account when calculating the amount of accrued interest. That is, the period begins on the next day after the calendar date or the occurrence of an event (action) that determined its beginning paragraph 2 of Art. 6.1 Tax Code of the Russian Federation” .
In view of the foregoing, interest must be accrued on the day the loan is repaid (unless this day is expressly excluded by the agreement).
TELLING THE MANAGER
It is better to directly indicate in the loan agreement on which day the interest calculation begins and on which day it ends. In this case, it will be possible to safely focus only on the text of your contract.
Interestingly, the debate about last day flared up in relation to interest under Art. 395 of the Civil Code of the Russian Federation. They are accrued in case of delay in the repayment of a loan or the fulfillment of another monetary obligation. And although, as a general rule, such interest is charged 'by day payment of the amount of these funds by the creditor
Instead of bank loan a legal entity can borrow money from a private investor or another company. Usually, you have to pay interest to the lender for using the loan, and in the case of an interest-free loan, the borrower pays a tax to the state. In order for the loan to be beneficial to both parties to the agreement, it is calculated what percentage should be under the loan agreement between legal entities.
How to draw up a loan agreement between legal entities
The agreement between legal entities is in writing. The contract specifies the essential conditions - without them, the court recognizes the agreement as invalid. In order not to risk, you should draw up an agreement in a notary's office - the notary will make sure that the document is legally literate.
You can borrow not only money, but also goods, raw materials, property. In this case, the parties draw up a list of property and describe in detail its name, quantity and features. The borrower returns exactly the same as borrowed. It is impossible to pay money instead of property - the tax authorities will consider such a sale and purchase transaction and oblige the creditor to pay income tax.
The heads of the companies indicate in the agreement the following essential conditions:
- names, legal addresses and details of organizations;
- what exactly the lender lends to the borrower and in what amount;
- when the borrower pays off the lender and how.
Whether it is necessary to accrue interest to the lender on a monthly basis is up to the parties to decide. You can pay off the debt monthly, quarterly, in one transfer at the end of the contract term. The borrower transfers cash to the lender, transfers money to a current account or sends it by bank details.
Additional conditions in the loan agreement between legal entities
The contract can specify additional terms, which refine the convention, for example:
- what is the responsibility of the borrower or lender if it violates obligations under the contract;
- what to do in a force majeure situation, for example, if the borrower falls ill and cannot pay;
- how to resolve possible disputes, for example, in negotiations or in court;
- Is it possible to extend the agreement and under what conditions?
A lender may offer a targeted loan to make sure the borrower is spending money on the business. In this case, the purpose of the loan is prescribed in the contract, and the borrower is obliged to spend the money for this purpose. If the borrower spends the loan on something else, the lender has the right to terminate the contract and demand early repayment of the debt.
Minimum interest rate under a loan agreement between legal entities in 2019
A legal entity lends money with or without interest. The law does not restrict minimum percentage under a loan agreement between legal entities. Banks offer entrepreneurs money at 6-20% per annum, and a private organization sets the rate at its discretion.
The company can lend money without interest, for example, if the founder and the borrower are old friends. But in this case, the borrower pays 21% per annum of the loan amount to the budget.
By law, a company that uses money for free receives material benefits - it must pay a monthly tax. The benefit is 5% of the loan and the tax is 35% of the benefit.
For example, a company borrows 300,000 rubles for a year, the contract is interest-free.
The material benefit is 15,000 rubles, the monthly tax is 5250 rubles.
During the year, the borrower will pay 5250 * 12 = 63,000 rubles to the budget, which is 21% of the loan amount.
At what rate should loans be issued to legal entities so as not to overpay
In order not to receive material benefits and not pay 21% to the budget, you should draw up an interest-bearing loan agreement with a minimum rate. The rate at which there is no material benefit is? from the refinancing rate. As of January 2019, it is 7.75%, which means that money should be given at 5.2% per annum or higher. With a loan of 300,000 rubles, the borrower overpays 15,600 rubles - four times less than with an interest-free agreement.
If a company lends money at interest, it earns income. The company declares income and pays income tax - up to 20%, depending on the tax form.
An interest-free loan is also taxed - if the legal entities are interdependent, and the loan amount exceeds 1 billion rubles. Companies are considered to be related when at least 25% of one company is owned by another. In this case, the creditor pays a tax on lost profits: he could invest 1 billion rubles and earn money, but gave the money for free use.
What is important to know about a loan agreement between legal entities
The company has the right to issue no more than four loans during the year. To lend for the fifth time, you need to obtain a license for lending activity. If this is not done, the company's management falls under criminal liability under Article 172 of the Criminal Code.
You can give out no more than 100,000 rubles in cash. Larger loans must be posted to a current account or sent to bank details. If an entrepreneur wants to borrow 200,000 rubles in cash and draws up two contracts of 100,000 rubles each, he risks paying a fine. The amount of the fine for legal entities is up to 50,000 rubles.
Loans over 600,000 parties register in Federal Service for financial monitoring. To do this, you need to go to the service website and fill out the form. If a company hides a large loan, it pays a fine. The legal entity is fined 200,000 rubles, the general director - 20,000 rubles.
The money that an entrepreneur receives under a loan agreement between legal entities can only be spent on business. For example, an entrepreneur can repay the company's debt to the state, but not his own loan. If a business owner or CEO spends borrowed money on himself, he risks fines and penalties or criminal liability.
What is better to choose: an interest-free or interest-bearing loan between legal entities
For the borrower, an interest-bearing loan with a minimum rate of 5.2% is more profitable - so he pays four times less than with an interest-free loan. A lender who lends at interest pays income tax, but earns on the interest itself.
The General Director provided a loan to the organization in the currency of the Russian Federation. Under what maximum% can be indicated in the contract, without tax risk for the organization?
Question: Please tell me, the general director (uncontrolled transaction) provided a loan to the organization in the currency of the Russian Federation, at what maximum% can be specified in the contract, without tax risk for the organization?
Answer: General norms of the Civil Code of the Russian Federation on a loan (Art. 807-818 of the Civil Code of the Russian Federation) do not provide size limit interest, which may be set by the party to the contract. In accordance with Article 421 of the Civil Code of the Russian Federation, the parties independently determine the terms of the contract that they conclude. Based on this, the parties have the right to provide for any interest on the loan amount and indicate it in the contract.
However, it should be borne in mind that the borrower may refer to the abuse of the right by the lender if the interest rate under the agreement is high, and also recognize the loan agreement with a high percentage invalid due to his bondage (clause 3, article 179 of the Civil Code of the Russian Federation). A loan agreement may be invalidated due to its bondage for the borrower if the interest rate is much higher than the average interest rate prevailing in the market for agreements with similar conditions. This is confirmed and judicial practice see Resolution of the Federal Arbitration Court of the Volga-Vyatka District dated September 26, 2006 No. A43-3546 / 2006-4-74, Resolution of the Federal Arbitration Court North Caucasus District dated 06/20/2006 No. F08-2680 / 2006, A61-2402 / 05-3. This jurisprudence can be used by tax authorities and invalidate the loan agreement, if necessary. Therefore, when determining the amount of interest on the loan amount under the agreement, it is recommended to set a percentage that does not exceed the average interest rate prevailing in the market for loan agreements, credit agreements.
Rationale
Civil Code of the Russian Federation
Article 179
1. A transaction made under the influence of violence or threat may be declared invalid by the court at the claim of the victim.
2. A transaction made under the influence of fraud may be declared invalid by the court at the claim of the victim.
Deliberate omission about the circumstances that the person had to report in the conscientiousness that was required of him under the terms of the turnover is also considered deceit.
A transaction made under the influence of deception of the victim by a third party may be declared invalid at the claim of the victim, provided that the other party or the person to whom the unilateral transaction is addressed knew or should have known about the deceit. It is considered, in particular, that the party knew about the fraud if the third party guilty of the fraud was its representative or employee or assisted it in the transaction.
3. A transaction on extremely unfavorable terms, which a person was forced to make due to a combination of difficult circumstances, which the other party took advantage of (bondage transaction), may be recognized by the court as invalid at the claim of the victim.
4. If a transaction is declared invalid on one of the grounds specified in paragraphs 1-3 of this Article, the consequences of the invalidity of the transaction established by Article 167 of this Code shall apply. In addition, the losses caused to the victim are compensated to him by the other party. The risk of accidental loss of the subject of the transaction shall be borne by the other party to the transaction.
Article 421. Freedom of contract
1. Citizens and legal entities free to enter into a contract.
Coercion to conclude a contract is not allowed, except in cases where the obligation to conclude a contract is provided for by this Code, the law or a voluntarily accepted obligation. 56P. 1 st. 426 of the Civil Code of the Russian Federation P. 2 Art. 846 of the Civil Code of the Russian Federation
2. The parties may conclude an agreement, whether or not provided for by law or other legal acts. To an agreement not provided for by law or other legal acts, in the absence of the signs specified in paragraph 3 of this article, the rules on certain types contracts provided for by law or other legal acts do not apply, which does not exclude the possibility of applying the rules on the analogy of the law (paragraph 1 of article 6) to individual relations of the parties under the contract.
3. The parties may conclude an agreement that contains elements of various agreements provided for by law or other legal acts (mixed agreement). To the relations of the parties under a mixed contract, the rules on contracts, the elements of which are contained in the mixed contract, are applied in the relevant parts, unless otherwise follows from the agreement of the parties or the essence of the mixed contract.
4. The terms of the contract are determined at the discretion of the parties, except when the content of the relevant terms is prescribed by law or other legal acts ().
In cases where the term of the contract is provided for by a rule that is applied insofar as the agreement of the parties does not establish otherwise (dispositive rule), the parties may, by their agreement, exclude its application or establish a condition different from that provided for in it. In the absence of such an agreement, the terms of the contract are determined by a dispositive norm.
5. If the terms of the contract are not determined by the parties or by a dispositive norm, the relevant terms are determined by the customs applicable to the relations of the parties.
How to apply for a loan
Parties to the loan agreement
A loan can be issued, as well as received, by any organization or person, including an entrepreneur. To do this, draw up a loan agreement with the recipient (borrower).
How to draw up a loan agreement
How to draw up a loan agreement
More importantly, for a loan that has interest, indicate how and when it must be paid. If this is not done, then the borrower will have to pay interest monthly until the debt is fully repaid (clause 2, article 809 of the Civil Code of the Russian Federation).
An example of how to issue a loan to the founder - an individual
LLC "Production Firm "Master"" decided to provide an interest-bearing loan in the amount of 2,000,000 rubles. at 6 percent per annum. The company provides a loan for two years non-cash form parts. The borrower pays interest at the same time as the principal (money). If the borrower repays the loan ahead of schedule, then he pays the interest on the same day as part of the debt. Such conditions of the parties to the transaction were prescribed in the loan agreement.
When the treaty enters into force
When does the loan agreement come into effect?
The loan agreement comes into force as soon as the borrower receives money or other property under it. And until this happens, the contract is not considered concluded. Even if it was signed by both parties. How does this affect accounting? It is on the day of transfer of borrowed funds that the counterparty has an obligation to repay the debt. And it is on this date that the lender must reflect the receivables.
At the same time, the total amount of the loan prescribed in the contract is not so important. What matters more is how much was actually transferred to the borrower. Let's say the loan amount is 10,000 rubles, but the borrower received only 5,000 rubles. So, only in the amount of 5000 rubles. there is a debt and an obligation to repay it (together with interest, if any were provided). This follows from the provisions and paragraph 2 of paragraph 1 of Article 807 Civil Code RF.
Loan payments
The borrower is obliged to repay the debt at the time and in the manner specified in the contract. If the repayment period is not set, then the debtor must repay the loan no later than 30 days after the lender so requests. This is stated in paragraph 1.
The return period is determined in calendar days.
It is in calendar days, and not in working days, according to the Civil Code, that the terms are calculated. In this case, the period must be counted from the day following the date when the organization submitted a request to repay the loan. If the last day when the debtor is obliged to finally pay off falls on a non-working day, then such a period is postponed to the next next working day. This is established in the articles, and the Civil Code of the Russian Federation.
A cash loan can be paid in cash and in non-cash order(Clause 1, Article 807 of the Civil Code of the Russian Federation). However, it is easier to make payments through a bank, because then you will not have to comply with the established limits for cash payments.
The debtor can repay the loan ahead of schedule. But if interest was provided, then close the debt ahead of time possible only with the consent of the lender. When the loan is interest-free, such permission is not required. This procedure is established by paragraph 2 of Article 810 of the Civil Code of the Russian Federation.
Did you give out a loan to an employee? Then the amount of principal and interest can be withheld from his salary upon application.
What document is used to issue and repay a loan
Having issued a cash loan, make an expense cash warrant according to the form No. KO-2. When returning a loan and interest, draw up an incoming cash order in the form No. KO-1. The forms of these cash documents approved by the Decree of the State Statistics Committee of Russia dated August 18, 1998 No. 88. It is imperative to apply them.
If the loan settlements are non-cash, then the transferred amounts will appear in payment orders in the form No. 0401060.
Situation: whether it is necessary to knock out a check of KKT, issuing cash loans and receive interest on them in cash
No no need.
Punch a cashier's check through a cash register if:
received cash in payment for goods sold, work performed or services rendered;
accepted cash rate as part of the organization and conduct of gambling, paid out the winnings;
received money for sold lottery tickets or a lottery bet, paid out the winnings.
The issuance or return of cash loans and interest on them is the provision of property for use, and not the provision of services. Therefore, when calculating a loan, do not use CCP. This follows from subparagraph 4 of paragraph 3 of Article 39 tax code RF, paragraph 1 of Article 1.2 of the Law of May 22, 2003 No. 54-FZ. The regulatory authorities agree with this conclusion (letters of the Ministry of Finance of Russia dated May 10, 2011 No. 03-01-15 / 3-51 and the Federal Tax Service of Russia dated December 20, 2016 No. ED-4-20 / 24495). This is also confirmed by the Presidium of the Supreme Arbitration Court of the Russian Federation (Decree of August 3, 2004 No. 3009/04).
Situation: can the debtor repay the loan and pay interest to a third party to pay off the debt of the lender for the delivered goods (works, services)
Yes maybe.
With this method of loan repayment, the lender's debt to the supplier decreases on account of the borrower's debt. At the same time, the essence contractual relations between the lender, the supplier of goods (works, services) and the borrower does not change. There is no transfer of debt. This conclusion follows from the Civil Code of the Russian Federation.
If the lender has decided that the borrower can pay for it, then this must be formalized by a letter of instruction. It must contain:
the name of the supplier to whom the money needs to be transferred, and his details (including the current account);
the number and date of the agreement under which the lender owes the supplier, or the number and date of the invoice for payment;
the amount to be paid by the borrower.
For example, a letter of instruction addressed to an employee can be formatted as follows.
The borrower can confirm the payment by a copy of the receipt to the incoming cash order or by a payment order, which should contain:
the amount of input VAT, highlighted on a separate line (if the supplier submits VAT).
Restrictions on calculations
Borrowed money can be paid in cash or transferred to the bank account of the borrower. Choose the second option when it comes to a large loan amount. The fact is that in cash you can give out no more than 100,000 rubles. under one contract. Such a restriction is contained in paragraphs and Instructions of the Bank of Russia dated October 7, 2013 No. 3073-U.
Attention: when issuing a cash loan, comply with the established payment limit, otherwise you will be fined.
- between organizations;
- between the organization and the entrepreneur;
between entrepreneurs.
Situation: when issuing a loan requires the permission of the participants (founders, shareholders)
Such permission must be obtained if a loan is issued large sum or the transaction, according to the criteria, refers to transactions with interested parties.
Thus, a large amount is considered to be an amount that is equal to or exceeds 25 percent of the value of the organization's assets as of the last reporting date. This follows from the provisions of paragraphs, and Article 46 of the Law of February 8, 1998 No. 14-FZ.
The list of those who may be interested in the transaction is determined by paragraph 1 of Article 81 of the Law of December 26, 1995 No. 208-FZ and paragraph 1 of Article 45 of the Law of February 8, 1998 No. 14-FZ. For example, an interested party transaction would be the issuance of a loan to the spouse, parents or children of the head of the organization. The amount of the loan does not matter.
In both cases, if there is no permission from the participants (founders, shareholders), the loan agreement may be invalidated. This is expressly established in paragraph 5 of Article 45, paragraph 5 of Article 46 of the Law of February 8, 1998 No. 14-FZ, as well as in paragraph 6 of Article 79 and the Law of December 26, 1995 No. 208-FZ.
The decision to grant a loan is made by:
the general meeting or the sole sole member of the LLC;
general meeting of shareholders of JSC;
board of directors or supervisory board of a non-profit organization.
What is the difference between a loan in kind and commodity credit
For the purposes of accounting and taxation, there are no differences between an in-kind loan agreement and a trade credit agreement.
There are only a few legal features. For example, the moment when the treaties enter into force:
for a loan - the date of transfer of property (clause 1, article 807 of the Civil Code of the Russian Federation);
for a commodity loan - the day of signing (paragraph 1 of article 822 of the Civil Code of the Russian Federation).
In addition, a commodity loan is recognized as interest-free only if this is expressly stated in the contract (clause 1, article 819 of the Civil Code of the Russian Federation). A property loan is interest-free by default (clause 3, article 809 of the Civil Code of the Russian Federation).
How to apply for a loan (credit)
An organization can receive money (property) for temporary use:
- under a loan agreement (clause 1 of article 807 of the Civil Code);
- under a loan agreement (clause 1 of article 819 of the Civil Code);
- under a syndicated loan (loan) agreement (Federal Law No. 486-FZ dated December 31, 2017 “On a Syndicated Credit (Loan) and Amendments to Certain Legislative Acts of the Russian Federation”).
However, there are significant differences between these treaties.
Differences between a loan agreement and a loan agreement
1. A loan in money can only be issued by a bank or a credit institution (clause 1, article 819 of the Civil Code). A cash loan can be obtained from any citizen, entrepreneur or organization (clause 1 of article 807 of the Civil Code).
2. Agreement money loan can only be interest (clause 1 of article 819 of the Civil Code). Under a loan agreement, money can be issued without a condition for the payment of interest (clause 1, article 809 of the Civil Code).
3. A trade credit agreement is recognized as interest-free only if this is expressly stated in its text (clause 1, article 819 of the Civil Code). The loan agreement in kind is such by default (clause 3 of article 809 of the Civil Code).
Forms of granting a loan (credit)
A loan (credit) provided to an organization may be monetary or property (loan in kind, commodity credit).
This follows from the provisions of the articles, CC.
Terms of the loan (credit) agreement
The amount of interest on a loan (credit) can be specified in the agreement. If there is no such clause, the organization must pay interest to the lender at the refinancing rate in force on the date of repayment (of the entire amount of the loan (credit) or part thereof).
The procedure for paying interest can also be provided for in the contract. But if this condition is absent, the organization must pay interest monthly until full repayment loan (credit).
If the lender (creditor) provides an interest-free loan (credit), this condition must be expressly stated in the contract (an exception is a loan in kind, by default it is interest-free).
The maximum amount of cash payments is 100,000 rubles. This limit applies to settlements under one contract:
between organizations;
between the organization and the entrepreneur;
between entrepreneurs.
Notification by the bank to the financial monitoring service
On receipt by the organization of a loan (credit) in non-cash form in the amount of at least 600,000 rubles. banks must notify the financial monitoring service. This happens in the following cases:
- if the organization received an interest-free loan;
- if one of the parties to the loan (credit) agreement is an organization or a citizen who is registered, resides or is located in a state (territory) that does not participate in international cooperation in the field of combating the legalization (laundering) of proceeds from crime and financing terrorism;
- one of the parties to the loan (credit) agreement is a person who owns an account with a bank registered in the specified state (in the specified territory).
Repayment of a loan (credit)
The organization is obliged to repay the received loan (credit) on time and in the manner prescribed by the agreement. If the repayment period is not set, the organization must repay the loan no later than 30 days after the lender (creditor) has made such a claim.
An organization has the right to repay an interest-free loan (credit) ahead of schedule. Early return interest-bearing loans (credits) is allowed only with the consent of the lender (creditor).
This procedure is also established by paragraph 2 of Article 819 of the Civil Code.
Issuance and repayment of a loan (credit) in cash
When obtaining a loan or returning borrowed funds in cash, draw up an incoming or outgoing cash order (forms No. KO-2 and No. KO-1, approved by the Resolution of the State Statistics Committee of 08.18.1998 No. 88). At the same time, it is necessary to comply
First of all, we evaluate the attractiveness of a loan offer from any credit institution by the interest rate. Banks are well aware of this and are luring us with another reduction annual interest. Indeed, the rate is the most important parameter of any loan, which affects its price (final overpayment), but far from the only one that we talked about in detail. You will learn more about what it is, about its varieties, and how you can influence it in this review.
Interest rate. What it is?
The interest rate is the amount expressed as a percentage of the amount of the loan being issued, which the borrower pays for the use of borrowed money based on a certain time interval (day, week, month, year, etc.).
Usually we are faced with an annual interest rate, that is, with the amount of overpayment for a year of using a loan, but we can often meet with a daily one. For example, any micro financial institution indicates the daily interest on the loan. But in essence, interest rate on a loan (hereinafter referred to as PS) is a synonym for annual PS.
For fun, do a little experiment. Open any loan calculator (they are easy to find through any search engine: Yandex or Google) and calculate the payment schedule with the following loan parameters: amount - 100,000 rubles; term - 1 year (12 months); interest on the loan - 10%; type of payment - annuity. As a result, you will receive an overpayment of 5499 rubles. Please note that this amount is not like 10% of 100 thousand (which is 10 thousand rubles), but much less. Why?
Everything is simple. The fact is that the payment schedule is designed for monthly repayments loan (we will talk about their varieties a little later). After the next repayment, the amount of the debt (the body of the loan) is reduced by the amount of the monthly installment, after which the interest is charged on the balance of the debt, which is getting smaller every month. Because of this, the total overpayment will be lower than stated.
But in the event that you paid the entire amount in a lump sum, you would have to pay 110 thousand. By the way, despite the fact that the second, one-time, repayment option is more profitable for banks, any loan is paid in installments and in most cases every month. This is done not only for the convenience of the client. Banks must see how timely the borrower fulfills the obligations under the contract, and in case of non-payment, take timely action.
What factors affect the interest rate on a loan?
There are many factors that affect the amount of interest on a loan. But the first of these is the size of the so-called key rate of the Central Bank of the Russian Federation. At the time of writing, it is set at 9%, but its value may change every quarter or even month, or may remain unchanged. It all depends on economic situation in the country.
The key rate of the Central Bank of the Russian Federation tells us that not a single bank offer with a lower annual percentage cannot be a reality. And if you see bank offers with more low rates, then, probably, the financial institution has included a lot of others in such products, which bring the amount of interest actually paid to the average market level.
Since the bank lends only borrowed funds, the level of annual interest is affected by:
- the value of current inflation;
- rate on interbank loans (banks can borrow from their business colleagues);
- the cost of paying interest to depositors.
Types of interest rates
Depending on various variable factors and the method of establishment, several types of rates are distinguished:
1. Fixed. The constant amount of interest on the loan, established by the agreement, which does not change over time and does not depend on the situation in the economy and other criteria.
2. Floating. Subject to periodic review due to changes in the key rate, inflation rate and other events in the country's economy.
3. Decursive. Interest payments are collected in a lump sum along with the main debt at the end of the loan term. That is, in the case consumer lending this type of annual rate is used.
4. Antisipative (or preliminary). Here the situation is directly opposite to the previous one. Immediately, all interest is charged at the time of issuing a loan, and their amount is calculated based on the total amount of debt.
5. Current. A rate fixed on a specific date and valid only for those loans that are issued on that day. In a day, a week, a month, completely different annual percentages will operate.
6. Forward. It is also fixed on a certain date, but is valid for all obligations that were issued after it was established. This rate is valid until the day when its new value is fixed.
7. Regulated and non-regulated. Depends on influence state structures(in particular, the Central Bank) on the size of the annual interest rate. Unregulated types are more often present in commercial banks.
8. Auction. These are the rates under loan agreements that were issued through a tender for trading platform. Consequently, auction procedures had a direct impact on their value.
9. Banking. Annual interest rate on loans that are issued to direct borrowers (companies and individuals). Set directly by the financial institution.
10. Rated. Based on current asset analysis banking institution without regard to market processes. Based on this indicator, the rates are calculated for each interest period.
11. Real. Nominal rate adjusted for price fluctuations.
The trick of a loan with a low interest rate or how to find out the real annual interest rate
We have already said that not a single loan issued by banks can cost less than attracted bank resources. Who will work at a loss? Certainly not a bank! Money, in fact, is the same commodity, for the use of which you have to pay.
Commercials and ongoing promotions will always talk about the lowest possible lending rate that exists in a bank, because the first thing a financial institution needs to do is attract a client. And only then be able to keep it and sell their products. Therefore, when applying for a claimed loan “at 12% per annum”, you will most likely find out that this rate applies to preferential categories (payroll clients, pensioners, etc.) and most often applies to short-term types of loans (up to a year) - usually minimum rates there are so-called (for their own).
For your own needs and opportunities, the bank will also have a “very profitable” offer with an annual percentage, say, “from 19%”. Do not rush to agree, study the offers of competitors.
Another publicity stunt is disguise. Often, the bank tries to “hide” the real interest rate on a loan among the many additional services and related fees. As a result, the client will be announced the minimum percentage per annum, but he will find out about the rest of the "cheat" later. As they say, there will be a surprise.
When we talk about the real rate, we mean the so-called effective interest rate (although it hasn't been called that since 2008), which reflects (TCP). PSK in accordance with the law must be indicated large print in the black frame at the top right of the first page loan agreement. It includes all the costs of servicing the loan taken, and is, in fact, the price of the loan. It is by this parameter that it is necessary to compare offers from different banks. By the way, PSK in without fail indicated as ANNUAL rate.
And one more nuance - look for the word "annual" in any sentence. You can often see advertisements that a financial institution offers loans “only” at 2%, but next to it “per day” will be attributed in small letters. As a result, such a loan will cost at least 730% per annum. And this is a real robbery, which has a more “streamlined” name - usury.
Read about which loan is the most profitable.
Overpayment calculation
The amount that you eventually have to pay to the bank also depends on the type of payment for it - it can be differentiated or annuity.
With a differentiated repayment scheme, the loan body is divided into equal parts, depending on the expected number of payments (this can be found in the payment schedule). To each equivalent part, the interest accrued on the balance of the debt is added, which will be maximum on the first payment and minimum on the very last. Thus, the amount of payment will decrease every month.
The annuity scheme divides all payments equally. Interest is also charged on the balance of the debt, but the share of the paid body of the loan in the first payments will be minimal - the main part of the payment will be the interest on the loan. Thus, first you will pay off the interest, and then you will pay off the main debt.
You can read about the advantages and disadvantages of each repayment scheme in, let's just say that banks mainly use an annuity scheme.
To calculate monthly payments, the following formulas are used (especially for those who are interested):
You can see the total overpayment in the schedule of payments issued by banks as an integral part of the loan agreement, or calculate in loan calculator on the bank's website or on another Internet resource.
How to reduce the interest on a loan?
Whatever the annual interest rate on a loan, there is always a chance to lower it. To do this, you must meet all the requirements of the bank for age, seniority and income, as well as be prepared to provide additional documents. If you receive wages on salary card, then you have every chance of getting a loan on preferential terms, the same applies to regular customers of the bank and depositors, although it is not recommended to get loans from the same financial institution in which you have a deposit (if the bank loses its license, then the deposit will not be returned to you, until you pay off the loan).
You can also use the "services" of the guarantor, or take a secured loan.
Universal advice: if you want banks to always treat you loyally, then from the very beginning of your “ credit life» be a disciplined borrower, fulfilling your obligations under the contract in a timely manner, and do not allow the deterioration of your credit history. It's easy to mess it up, but it's harder to fix it.