What is an investment tax credit

In our time, borrowed funds accompany the organization almost throughout its entire operation. With their help, production is modernized, raw materials are procured, and finally, working capital is simply replenished. The source of such money is used (most often) by banking institutions. But there is a unique type of loan, which is in the hands of the state, and with which you can solve problems with budget payments. This is an investment tax credit.

What is the essence of such a loan? Let's consider it in more detail.

Judging by the definition given in the Tax Code, such a loan is a deferred payment rather than a loan of funds. Indeed, there are no real funds for it, but after its registration, the organization is allowed to pay taxes in a smaller amount.

Despite the fact that the agreement is concluded with the state organization, most of the conditions are similar to those used by banks. Here the credit period, maturity and even interest (most often very small) are set. Here, property liability for non-repayment is determined, guarantees of performance of obligations are accepted

Who is given

Despite the fact that not only companies, but also individual entrepreneurs can have tax debts , an investment tax credit is issued only to legal entities. This is due to the peculiarities of property liability. At the organization it is possible for debt to take away the pledged property, for this purpose the court decision can not be required even. But a citizen to deprive housing is very difficult. The Civil Code protects personal property, especially if it is necessary for living.

What needs are given

As for the subject of lending, most often this way, the income tax is extinguished, the payment terms of which are very expensive to violate. Inevitably, sanctions will come in the form of fines, and with long delays and fines. With those amounts of payments that are inherent in it, all these amounts translate into significant funds.

It is noteworthy that the state was concerned that this list was not too extensive. In addition to the profit tax, only certain types of regional and local payments to the budget can be credited.

What is the mechanism

Investment tax credit has a very definite mechanism. The organization to which it is granted may, as we have said, reduce payments for the reporting period. However, the end point of the contractual relationship is the moment when the amount of the underpaid tax is equal to the amount of the loan. As a result, such an agreement looks like a solution to the existence of debts.

In addition, you can reduce payments only to a certain limit. Legislation has established this bar for 50% of the amount of tax paid under normal conditions.

Such a loan should have a certain time frame. The minimum period is set to one year, the maximum is five years. During this time it is understood that the problems will be solved.

In this case, there may be a situation where the organization had to pay taxes less than planned, and even generally received losses. Then there is a surplus on credit resources. It's simple: the amount of savings is then transferred to a new reporting period.

Of course, an organization that prepares an investment tax credit should be prepared for increased control by the tax authorities. First, it will have to prepare a solid foundation in preparing the treaty and submit detailed reports on its financial activities. Secondly, to check the organization will be much more often than usual. This always happens when using public funds.