Is it acceptableto borrow money from company with no interest?

Unlike individual businesses, corporate businesses are distinct from their owners (shareholders or representatives). This means that if you need funds from a corporate account, you can't simply withdraw them; instead, you must obtain them through methods such as salary, dividends, or loans. This applies not only to large companies with numerous shareholders but also to small corporations where you are the sole shareholder.

Today, I'll be explaining how much interest you should pay when borrowing money from a corporate bank account.

 

1.Firstly, it's crucial to determine if you are a related party to the company

A related party typically includes individuals or other companies with a connection to the company. This commonly encompasses employees, shareholders, or individuals and entities capable of exerting control over the company, even if they aren't employees or shareholders.

When a company engages in transactions with these related parties, special attention should be given to the transaction price. If the price deviates significantly from the average, the tax office may recalculate it and impose taxes accordingly.

 

2.The legal interest rates stands at 4.6%

the legal interest rate

This rate, as specified in tax law, is applicable to loan transactions between a company and its related parties. (the legal rates changes depending on the market interes rate)

Consequently, when obtaining a loan from the company, it's essential to incorporate this interest rate into the loan contract and fulfill the corresponding interest payments.

 

3.What if you don't pay for the interest?

Failure to pay the prescribed interest could lead to investigation by the tax office. In such cases, the tax office may compel the company to recalculate the interest rate at the fixed 4.6%. Consequently, both the corporate tax income and the income of the related party (who didn't make the interest payment) would increase by the calculated interest amounts. 

 

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G-tax(Seoul, Korea)

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