What is loan interest waiver
The coronavirus pandemic does not stop at VAT either!
How should payments from the state COVID support be treated with VAT?
The short-time work allowance (KAE) is an inflow of funds within the meaning of VAT that cannot be accounted for with VAT due to lack of performance (Art. 18 Para. 2 VAT Act). The KAE are to be listed in the VAT return form under number 910.
Also to be declared under section 910 of the accounting form are reimbursements or compensation to employers based on special legal provisions. This also includes remuneration of the employer's contributions AHVIIVIEOIALV based on the income compensation scheme (E0). For value-added tax, this is neither a consideration for a service nor a subsidy. They do not require a pre-tax correction.
COVID bridging loan
Since the loans are not subject to normal market interest rates, the question arises whether the difference to the normal market interest rate is a subsidy in favor of the borrowing company. Since the credit relationship exists between the bank and the borrowing company and the federal government is not involved, the FTA does not assume a subsidy relationship. Since there is no subsidy, the borrowing company does not have to reduce the input tax deduction despite the non-market interest rate.
The payment of a COVID bridging loan does not have to be declared anywhere in the VAT statement.
Does the temporary lowering of the default interest rate to 0% have VAT consequences?
From March 20, 2020 to December 31, 2020, late payment will not result in interest on arrears. This provision is to be understood in such a way that between March 20, 2020 and December 31, 2020 the default interest is 0%. This zero rate applies to all VAT claims during this period, including those that arose before March 20, 2020.
According to administrative practice, a partial or full interest waiver by the public sector is considered a subsidy, which can lead to a reduction in input tax for beneficiary companies. The state reduction in default interest can hardly be described as loan interest waiver (since no loan has been agreed), but it is a shift in the interest rate for tax debts. From our point of view, these are not to be declared.
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