What is taxable interest

Taxable interest refers to those 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 favour 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 tax collection. On the other hand, we have that only those interests that are credited in favour of the company, and not the interests that the company incurs, that are included as exits, are counted as taxable.

Everything you need to know about taxable interests

To better understand the issue of taxable interests, you must be clear about some associated terms so you don’t confuse the concepts.

Exempt Interest

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

Within this category, some activities are not very common, but it is important to highlight that there are some interests that are not taxable at the time of reporting.

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

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

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

Tax returns

It is important to consider the appropriate payment dates for our businesses. Check the time to take your tax information and the dates on which you must credit the payments.

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

When it’s time, be sure to declare with pennies and signs every penny, the fines are usually excessive if they think you’re trying to outwit the system.

Add all the paperwork necessary to be clear about what the taxable interests are and which, if any, are exempt.

Are the interests of my bank account taxable?

It is possible that the doubt arises about the interests that are 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 apply withholding tax or at least not in most cases.

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

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

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

Keep in mind that, although taxable interests do not correspond to a direct selling activity, they do correspond to profit in favour of the company.

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

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

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

We hope that the concept of taxable interests and exempt interests is clear enough and that you have the clarity of which correspond to each. This way you will avoid problems in the future.