What Is an Investment Interest Expense?

Capital interest refers to the interest remuneration obtained by shareholders for investing in enterprises through loans. In transnational investment and operation activities, in order to solve the shortage of funds that should be subscribed for by itself, some shareholders often use loans to obtain funds to invest in the company and obtain interest income. If this interest is allowed to be included in the cost of the enterprise, it is bound to reduce taxable income. Therefore, many countries in the world have clearly stipulated that capital interest cannot be expensed before expenses are calculated. China's Sino-foreign joint venture income tax law and foreign enterprise income tax law have similar provisions. ^[1]

Capital interest

Right!

Capital interest refers to the interest remuneration obtained by shareholders for investing in enterprises through loans. In transnational investment and operation activities, in order to solve the shortage of funds that should be subscribed for by itself, some shareholders often use loans to obtain funds to invest in the company and obtain interest income. If this interest is allowed to be included in the cost of the enterprise, it is bound to reduce taxable income. Therefore, many countries in the world have clearly stipulated that capital interest cannot be expensed before expenses are calculated. China's Sino-foreign joint venture income tax law and foreign enterprise income tax law have similar provisions. ^[1]

Chinese name

Capital interest

Meaning

Gains from capital assets

Features

Is an unexpected wait

Nature

Is different from general operating income

Characteristics of capital interest

Capital interest is different in nature from general operating income, and its characteristics are mainly reflected as follows:

(1) Capital interest is an unexpected and non-periodical income;

(2) The realization of capital interest generally takes a long time, and therefore often includes the factor of inflation;

(3) Capital interest is generally composed of pure capital gains and capital gains converted from part of investment income, and investment income is after-tax.

Brief analysis

Everyone knows that people generally don't lend money in vain. Because people's capital or their equivalents can always find others, even if they have no proper use for themselves. These people use capital profitably and are willing to pay the price to obtain capital. They look forward to the most profitable market.

As we all know, even among the Anglo-Saxon clan and other strong and cultivated celebrities, very few people are willing to save most of their income; the recent increase in inventions and the development of new areas are capital. Use has opened up a broad road. And under the balance, the use of capital is the source of wealth, so you can get paid when you lend out capital.