Agreement on debt forgiveness between legal entities: when is it concluded, what is regulated and what should it include?

Debt forgiveness under a loan agreement: basic provisions

One of the possible ways to terminate obligations under a loan agreement is the forgiveness of the debt by the lender-creditor to the borrower-debtor.
The parties to these legal relations are both legal entities and individuals. The procedure is regulated by the provisions of Art. 415 of the Civil Code of the Russian Federation. For other possible ways to terminate obligations, read the ready-made solution ConsultantPlus. If you do not yet have access to the ConsultantPlus system, you can obtain it free of charge for 2 days.

In accordance with this article, the debt can be canceled either completely or partially, subject to certain conditions:

• there are no objections from the debtor;
• the rights of other persons related to the creditor’s property are respected.

Since forgiveness of a loan debt frees the borrower from property obligations to the lender, such an expression of the latter’s will can be qualified as a type of donation if:

• it is performed free of charge (Article 572 of the Civil Code of the Russian Federation);
• the court determined that the lender intends to release the borrower from paying the debt as a gift (clause 3 of the information letter of the Presidium of the Supreme Arbitration Court of the Russian Federation “Review of the practice of application ...” dated December 21, 2005 No. 104).

Important! Donations between businesses are not permitted. An exception is gifts worth no more than 3,000 rubles. (Subclause 4, Clause 1, Article 575 of the Civil Code of the Russian Federation).

In order for debt forgiveness to be distinguished from a gift, the lender, when carrying out such an action, must indicate that he has no intention of giving a gift to the debtor. This can be done by justifying the feasibility of writing off the debt, for example:

• to return part of the money without legal proceedings;
• in order to continue cooperation with the debtor (resolution of the FAS ZSO dated December 12, 2011 in case No. A46-5477/2011), etc.

Purpose of compilation

The founder of the organization is the owner of a significant share of the assets and has the right to dispose of them at his own discretion. At the same time, the founder can replenish the working capital of the legal entity from his own financial resources. Regardless of the size of equity participation in the company, the investor provides a loan of unlimited size for any period. The borrower can take out a loan at the initiative of the manager with a priority number of shares and votes.

Borrowed capital is necessary for the enterprise to restore solvency, develop the production and material base, and introduce new technologies. Lending from the founder is the most profitable option for attracting third-party assets. First of all, the lender knows perfectly well the internal state of affairs of the borrower and will not require additional information or supporting documents. In addition, the owner is personally interested in the well-being of the organization, so he will not tighten lending conditions.

The creditor has the right to claim the debt within the terms established by the contract or to completely waive the loan amount and interest in favor of the debtor. For the borrower, at the time of forgiveness of the debt arrears, tax obligations arise, the need to reflect profits and pay taxes to the state budget. In addition, the event is accompanied by certain nuances and subtleties.

So, debt forgiveness is a procedure for completely terminating the existence of obligations by the decision of one party, namely the lender. The most important consequence of such actions is a complete refusal to make claims in the future. The creditor will no longer be able to return his own money or go to court after signing the relevant agreement.

Debt resulting from the borrower’s failure to fulfill its obligations under the loan agreement may be forgiven by the lender

Legality of the transaction

The main legal act regulating the procedure for terminating obligations through forgiveness is the Civil Code of the Russian Federation, Article 415. Both legal entities and citizens can act as lenders. The borrower is exclusively the organization. The debt is canceled in whole or in part by agreement of the parties to the relationship. It is worth considering that the agreement should not violate the rights of others.

Due to legislative subtleties, in 2020 forgiveness can be qualified as a gift if the transaction is gratuitous. Counterparties should not forget that the practice of giving gifts between companies is prohibited by law (Article 575 of the Civil Code of the Russian Federation) if the value of the gift exceeds three thousand rubles.

To eliminate the possibility of disputes and the risk of recognizing the transaction as fictitious or reclassified as another type, the parties to the agreement must confirm the absence of signs of a gift. For example, the creditor forgives part of the debt so that the debtor can repay the remaining amount within the period established by the contract. Mutual cooperation in the future will also serve as a rationale.

Registration of debt forgiveness

Before formalizing debt forgiveness under a loan agreement, the lender must make sure that his actions do not violate the rights of persons related to his property (clause 1 of Article 415 of the Civil Code of the Russian Federation). Such persons may be the lender's spouse, co-founders, or in some cases counterparties to other transactions. Also, you should not forgive debts in anticipation of the upcoming bankruptcy (Article 61.2 of Law No. 127-FZ of October 26, 2002).

As stated in paragraph 2 of Art. 415 of the Civil Code of the Russian Federation, debt forgiveness requires mandatory notification of the debtor. Although the legislator does not impose specific requirements for this document, it is advisable to include information in it:

• about the initial agreement (in our case, the loan agreement);
• the amount of existing debt;
• intention to write off the debt in full or in a certain part;
• conditions or purpose of performing this action.

Note! The notification can be sent in any way that makes it possible to reliably establish from whom it comes and to whom it is addressed (clause 65 of the resolution of the Plenum of the Armed Forces of the Russian Federation “On the application ..." of June 23, 2015 No. 25).

If the debtor does not present his objections within a reasonable time, then according to paragraph 2 of Art. 415 of the Civil Code of the Russian Federation, the obligation terminates from the date of receipt of the document. To determine the response time, it seems permissible to use the provisions of paragraph 2 of Art. 314 Civil Code of the Russian Federation.

If the debtor has any objections or clarifications after their approval, the debt write-off should be formalized by an additional agreement to the current loan agreement or a separate agreement.

In what cases is it compiled?

When transferring things, securities or funds from one person to another, a loan agreement must be drawn up.

According to this document, after a certain period of time, the debtor legal entity must return valuables or finances to the creditor. From the moment of its conclusion, the borrower assumes obligations.

If the debtor is unable to make payments, the parties may terminate the contractual relationship in another way.

The legislation allows entities to complete the loan agreement peacefully.

Such agreements are confirmed in writing. This is necessary so that in case of conflict situations the parties have official evidence, for example, in bringing the dispute to the courtroom.

Drawing up a document is possible only if the creditor has given voluntary consent to such a procedure.

Information about this is set out in the Civil Code of the Russian Federation, Art. 415. At the same time, the legislation explains that these manipulations are equivalent to a gift agreement.

These rules apply to individuals. What document formalizes relations between commercial organizations?

The law states that such a transaction is possible, but it cannot be free of charge.

This means that if a loan agreement is concluded between legal entities, it is possible to draw up a forgiveness agreement only on the principles of remuneration. Otherwise, the tax authorities will be interested in such a transaction.

Therefore, the document is drawn up in the form of an agreement, which must clearly state what the other party receives for debt forgiveness.

It could be:

• merger or acquisition of companies;
• the debtor taking upon himself to solve any problems of the creditor;
• payment of the lender's debts.

The form of forgiveness involves a complete refusal by the borrower to fulfill his obligations. Under this agreement, it is not possible to forgive part of the debt. In other words, you cannot change the size, volume or nature of the resulting debt.

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Contract (agreement) on debt forgiveness

Based on the provisions of Art. 415 of the Civil Code of the Russian Federation, to forgive a debt, the will of the lender, expressed by notifying the borrower of complete or partial cancellation of the debt, is sufficient. However, in practice, they often draw up an additional agreement to the existing loan agreement.

The parties to the agreement can be both individuals and legal entities.

When making a decision to cancel a debt, it is advisable for the creditor to have an act of reconciliation of mutual settlements with the debtor. Next, you need to define and record the terms of the agreement:

• The clearly expressed intention of the creditor to cancel existing debt obligations (clause 1 of Article 415 of the Civil Code of the Russian Federation).
• Information about the obligation (name, number, date and parties) terminated as a result of this action. In the absence of the specified information, the court may recognize the debt forgiveness agreement as not concluded (Resolution 2 of the AAS dated May 19, 2010 in case No. A31-4521/2009).
• The amount of debt forgiven (resolution of the Federal Antimonopoly Service of the Eastern Military District dated September 10, 2009 in case No. A39-1176/2009).
• Conditions for forgiveness (if any).

Debt cancellation can be completed, as mentioned above, by concluding a separate agreement. An example of this document is presented here: Debt forgiveness agreement under a loan agreement - sample.

Writing off a debt to an individual can also be formalized through a gift agreement.

When an employer cancels a debt to its employee, it is permissible to issue an order or instruction.

Legal regulation of the procedure

It should be noted that after concluding an agreement on debt forgiveness, the lender will no longer be able to change his decision in the future and demand a refund. In addition, the debtor organization may have a new obligation - it may have to pay income tax on the forgiven amount.

You can find a sample debt forgiveness agreement by the founder below.

When concluding a contract, the provisions of the following legislation should be taken into account:

• Art. 415 of the Civil Code of the Russian Federation. This article outlines the basic requirements for the debt forgiveness procedure.
• Art. 421 of the Civil Code of the Russian Federation - it is stated that subjects have the right to conclude any types of agreements with each other, incl. not provided for by current legislation.
• Clause 11 Art. 251 Tax Code of the Russian Federation. The norms of this article must be taken into account when determining the tax base after forgiveness of the debt by the founder.

Debt forgiveness is a formal transaction, so it must be formalized legally. The parties enter into an agreement or contract for debt forgiveness. The following points should be taken into account:

• the procedure should not violate the interests of third parties or in any way infringe on them;
• the debt forgiveness agreement can be canceled in court if interested parties file a lawsuit and it is proven that their rights have been violated;
• parties to the agreement must take into account the tax consequences that will arise after debt forgiveness.

Taxation of a debtor - an individual

According to the provisions of tax legislation, in the case of forgiveness of a debt under a loan agreement to an individual, the latter will receive income - economic benefit (clause 1 of Article 41 of the Tax Code of the Russian Federation) in the amount of the loan written off and interest (when issuing a loan with interest). This amount is subject to personal income tax at a rate of 13% (clause 1 of Article 210, clause 1 of Article 224 of the Tax Code of the Russian Federation, letter of the Ministry of Finance of Russia dated October 17, 2016 No. 03-04-07/60359).

When writing off a debt on an interest-free loan, taxable income in the form of material benefits from saving on interest does not arise for the payer (letter of the Ministry of Finance of Russia dated October 28, 2014 No. 03-04-06/54626).

The creditor organization, being a tax agent, is obliged to make all relevant transfers to the budget.

If the creditor is the debtor’s employer, the amount of personal income tax due to be paid to the budget can be withheld from the money paid to the employee (clause 4 of Article 226 of the Tax Code of the Russian Federation).

If it is impossible to make the specified transfers, the tax agent is obliged to inform the payer and the tax authority at the place of his registration (clause 5 of Article 226 of the Tax Code of the Russian Federation, order of the Federal Tax Service of Russia dated October 2, 2018 No. ММВ-7-11 / [email protected] ).

In this case, individuals pay personal income tax on the specified income on the basis of a notification from the tax authority (clause 6 of article 228 of the Tax Code of the Russian Federation).

Important! If the amount of the forgiven debt is equal to or less than RUB 4,000. or the debt is forgiven as a gift, there is no need to pay tax on the forgiven amount (Clause 28, Article 217 of the Tax Code of the Russian Federation).

Tax consequences for legal entities

It should be noted that when drawing up a debt forgiveness agreement, the borrower must be prepared that not only positive aspects await him. According to accounting, he will have to display this amount as unrealized income.

These norms are prescribed in Art. 250 Tax Code of the Russian Federation. Paragraph 18 of this article states that the amount of money specified in the forgiveness agreement is indicated.

Entering an amount into this category of the balance sheet results in tax consequences.

A debt forgiveness agreement is one of the legal tools that allows you to resolve a controversial situation with a legal entity that, due to circumstances, cannot pay the debt.

Its registration occurs only with the consent of the lender and implies a paid release of obligations from the borrower.

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Contributions to state extra-budgetary funds

As a general rule, amounts transferred to an individual under civil contracts (in our case, a loan agreement), the subject of which is the transfer of ownership of property (including money), are not subject to insurance contributions to state extra-budgetary funds (clause 4 Article 420 of the Tax Code of the Russian Federation).

This is consistent with the position of the judiciary. According to the judges, a debt under a loan agreement forgiven by an employer to his employee is not subject to insurance premiums if these relations are not related to the employee’s work responsibilities, and the debt write-off is formalized by a gift agreement (see resolution of the AS PO dated 05/07/2015 No. F06-22195/ 2013 in case No. A12-30165/2014, decision of the Supreme Court of the Russian Federation dated August 18, 2015 No. 306-KG15-8237).

A similar position is presented in the letter of the Federal Tax Service of Russia dated April 26, 2017 No. BS-4-11/8019.

However, as noted in the same document, if such non-repayable loans are issued by the employer to its employees systematically, this may mean that the employer is hiding labor benefits under the loans.

Purpose of the agreement

The agreement in question is regulated by Art. 415 of the Civil Code of the Russian Federation. In accordance with this article, debt forgiveness is qualified as a method of terminating the obligation to return money under a contract. The moment of termination of obligations occurs simultaneously with the receipt by the debtor of notification from the creditor that the latter forgives his debt.

The conditions for the validity of forgiveness will be:

• voluntariness of forgiveness on the part of the creditor;
• absence of objections from the debtor;
• preventing others from being worse off as a result of the act of debt forgiveness.

The purpose of the agreement, therefore, is to terminate obligations that could give rise to negative consequences for the debtor.

Issues of calculating corporate income tax when forgiving loan debt

According to Art. 247–252 of the Tax Code of the Russian Federation, the object of taxation for profit tax is the company’s income (including non-operating), reduced by the amount of expenses incurred (including non-operating).

For the debtor, the amount of the forgiven loan and interest on the loan is non-operating income that increases the tax base (clause 18 of Article 250 of the Tax Code of the Russian Federation).

For the creditor, the issue of including the written-off debt as part of non-operating expenses that reduce taxable profit is not resolved so clearly:

• According to the judges, the creditor has the right to include a partially forgiven debt in non-operating expenses, since partial write-off is aimed at generating income, but in a smaller amount (resolution of the Presidium of the Supreme Arbitration Court of the Russian Federation dated July 15, 2010 No. 2833/10 in case No. A82-7247/2008- 99).
• The Russian Ministry of Finance, on the contrary, believes that the amount of forgiven debt, including partially forgiven, cannot be taken into account as part of such expenses, since it is not a justified expense in the sense of Art. 252 of the Tax Code of the Russian Federation (see letter of the Ministry of Finance of Russia dated April 4, 2012 No. 03-03-06/2/34).
• The Federal Tax Service of Russia, taking into account the opinion of the judges, in a letter dated August 12, 2011 No. SA-4-7/13193, confirmed that the creditor has the right to include the written-off debt as part of non-operating expenses if it took measures to collect it in court and mutual claims were settled by a settlement agreement . Then these expenses will meet the requirements of paragraph 1 of Art. 252 of the Tax Code of the Russian Federation. If there are no attempts to collect the debt, it can be written off only when the statute of limitations expires (subclause 2, clause 2, article 265 of the Tax Code of the Russian Federation).

Accounting and postings (how to arrange debt forgiveness between legal entities)

Due to the fact that the forgiven debt cannot be taken into account when calculating the tax base, permanent differences arise in accounting with permanent tax liabilities - these discrepancies should be reflected in DEBIT 99 and CREDIT 68 . When concluding a transaction to forgive the debt of a legal entity, the following entries can be used:

A debt from a counterparty may arise not only due to late payment for shipped goods, but also as a result of obtaining a loan. In this case, the lender is obliged to keep separate records of the loan itself and the interest on it. At the stage of drawing up an agreement on the forgiveness of such a debt, it is necessary to provide a clause that would explain what amounts this agreement applies to - exclusively to borrowed funds or also to interest accrued on the loan.

Important!

The lender can initiate an agreement to forgive not the loan debt itself, but only the interest and penalties on it.

Here's what you need to remember about loan forgiveness:

• the forgiven debt in the amount of interest on the loan is not recognized as an expense transaction (see Letter of the Ministry of Finance of the Russian Federation dated December 31, 2008 No. 03-03-06/1/728), however, in accounting such an operation entails the appearance of expenses according to PBU 18/02;
• an entry is made in the accounting records DEBIT 91.2 CREDIT 76 for the amount of interest on the loan being written off;
• Since loans are not subject to VAT, there are no tax consequences for this type of tax when the interest debt is forgiven.
• After signing the debt forgiveness agreement, the accountant makes the following entries in the accounting registers:

Forgiveness and taxes

In accordance with Art. 41 of the Tax Code of the Russian Federation, a debt forgiven to an individual is the income of the debtor. That is, the amount for which the debt was forgiven is included in the tax base and is subject to personal income tax at a 13 percent rate.

Thus, when an employer forgives a debt to an employee, personal income tax equal to 13% of the forgiven amount is withheld from the employee’s salary. Taxes are not collected on a forgiven debt in an amount not exceeding 4 thousand rubles, or on a debt forgiven by a gift agreement.

It should be noted that repeated forgiveness of debts to employees by the employer always attracts increased attention from the tax authorities, since it can hide the so-called “salaries in an envelope.”

Forgiven debts of a legal entity-debtor, in accordance with Articles 247-252 of the Tax Code of the Russian Federation, are recognized as profit, that is, its non-operating income.

Contents of the agreement

To ensure that the debt forgiveness agreement complies with the requirements of contract law, it is recommended that it include the following information:

1. the date of signing the agreement and the place of its preparation;
2. names (full name for individuals) of the parties to the agreement;
3. the amount of the debt obligation and the source of their origin (loan agreement, for example). In this case, the source of obligations must be characterized. The characteristics may include the contract number, its date, etc. An agreement that does not contain this information will be considered void;
4. debt components – loan body, interest, penalties, etc.;
5. a clearly expressed will of the creditor to forgive the debtor the debt in whole or in its individual components;
6. the purpose of forgiveness, such as preserving the business relationship and continuing cooperation;
7. terms of forgiveness, if forgiveness provides some benefit for the creditor;
8. signatures of the parties to the agreement.

Forgiveness as a gift

Forgiveness of a debt between individuals, provided that the forgiveness is gratuitous, can be qualified as an act of gift if the creditor wishes to relieve the debtor of the debt burden by donating the borrowed amount as a gift. That is, in this case, the act of donation will occur post-factum, that is, some time after the actual transfer of money. This is evidenced by the “Review of Judicial Practice of the Armed Forces of the Russian Federation” 104 of December 21, 2005.

Please note that this review deals exclusively with transactions between individuals. This is due to the fact that donation between legal entities, in accordance with Art. 575 of the Civil Code of the Russian Federation, is permissible only for an amount not exceeding 3,000 rubles.

In this way, forgiveness can be given as a gift. But if there is no talk of a gift as such, then the agreement must include a justification for forgiveness. Thus, the following may be indicated as justifications:

• the goal of avoiding litigation;
• the goal of a peaceful settlement of the dispute with the debtor for further continuation of cooperation;
• the purpose of returning the body of the loan without interest on it, etc.