What is taxable interest

Taxable interest refers to income associated with an interest charge from positive economic and financial activities for the company.

This implies two things, on the one hand, that the interests credited in favor in the accounting books are subject to subsequent taxes. This means that they do not represent a net profit until after declaring before the entities in charge of collecting taxes. On the other hand, we have that only those interests that are credited in favor of the company are counted as taxable, and not the interests that the company incurs, which are included as exits.

Everything you need to know about taxable interest

To better understand the subject of taxable interest, you should be clear about some associated terms so you do not confuse the concepts.

Exempt interest

There are also some exempt interests. These, unlike taxable interest, are not subject to charges by regulators.

Some not very common activities fall into this category, but it is important to note that there are some interests that are not taxable at the time of filing.

In most cases these are mixed or public investments, which generate relatively low interest and being a “Partner” of the state you have certain benefits.

It can also be sales or retro-sales associated with services, in which a withholding at source is involved, in this case you must make sure if said withholding was applied to interest.

If the answer is yes, then you would be receiving the net interest. Remember to save all the paperwork related to these types of sales. You will need it to avoid overpaying on your return.

Tax returns

It is important to take into account the timely payment dates for our businesses. Check the time to bring your tax information and the dates in which you must credit the payments.

Paying on time can benefit you or at least save you extra payments for late payment, or penalties associated with bad tax behavior.

When the time is right, make sure you declare every penny with hair and signs, the fines are usually excessive if they think you are trying to circumvent the system.

Add all the necessary paperwork so that it is clear what the taxable interest is and which, if any, are exempt.

Is the interest on my bank account taxable?

It is possible that doubts arise about the interest that is generated in our bank accounts, although it is not usually much at the end of the accounting period, it can represent a considerable sum. The point is that bank accounts do not have withholding tax, or at least not in most cases.

Although, it is possible that depending on the country you are in, some type of tax is applied directly to the bank account as a kind of withholding.

In this second case, the taxable interest becomes net interest and it is not necessary to declare it at the end of the accounting period. But do take them into account for GDP and other statistics.

For this, it is necessary to provide the relevant documents, such as the bank strata where the retention made on the interest on the account is specified.

Keep in mind that, although taxable interest does not correspond to a direct selling activity, it does correspond to profit in favor of the company.

In this sense, interest represents a kind of service income, and in no case should it be omitted from the tax return.

Remember that if you omit information, state entities can request an audit, which will be much more rigorous and may have problems.

Many times the fines are imposed by simple errors of omission or ignorance, and although there is no bad intention, the fraud is flagrant so you can hardly defend yourself.

We hope that the concept of taxable interest and exempt interest is clear enough and that you are clear about which ones correspond to each. This way you will avoid problems in the future.