Identifying the loan or loan is a decisive step in the process of processing economic credit. A loan (but not necessarily a debt made up of another form of credit (see item 17.6) is always created by an agreement between the borrower and the lender. It is the agreement that determines the amount of the loan. 6 . Deduction of interest paid by the director or staff for this year`s loan. The amount to be paid is referred to as the cash equivalent of the loan amount. This is the difference between the fact that Mr. A had two interest-free loans from his employer as follows: one of the essential conditions for the application of the Indonesian/Dutch double taxation agreement was that the new Dutch company be the “economic beneficiary” of the interest paid or payable by the parent company. The Court found that this concept must, in the context of a double taxation convention, have an international fiscal meaning that does not derive from the national legislation of the contracting states. The term “beneficial owner” is contrary to that of an official owner who was not entitled to directly benefit from the income. The legal, commercial and practical structure behind the loan contracts meant that the issuer or the new Dutch company (if it sold the loan contract) could not benefit from such a privilege. None of them would benefit directly from the interest payable by the parent company – they would only be managers of that income.
Indofood`s case involved a more complex initial financing structure. Inofood International Finance Ltd, a Mauritian company, was the issuer of Credit Notes of English law guaranteed by the Indonesian parent company. The proceeds of the loan bonds were lent by the issuer to its parent company under a separate loan agreement, in accordance with Indonesian law. Under this agreement, the parent company was required to pay interest to the issuer in a timely manner so that the issuer could pay interest to its bondholders, but in practice the parent company had actually paid interest directly. This structure allowed the parent company to benefit from the double taxation agreement between Indonesia and Mauritius, which reduced its interest deduction to 10% (instead of the normal rate of 20%). There is an exception to the rule in paragraph 17.11 that a loan is obtained because of a person`s employment if it is made by his or her employer or a potential employer.