When a loan is paid, whether personal or mortgage, there are always two separate items in each installment: principal and interest. As you well know, the principal is the part of debt that is returned while interest is the price charged by the one who lends the money for doing so (usually a bank).
Regarding the loans of the company (I mean only and exclusively these) the only thing that taxes when paying less taxes are interest. And it is that the result of the activity is determined by subtracting the expenses from the income. Only expenses. And the repayment of the principal of a loan is not an expense. An expense is a decrease in the company’s assets:
On the other hand, the return of a loan is not an expense because it does not imply a decrease in assets:
If the asset decreases and the liability decreases in parallel, the company’s equity remains the same. Therefore, if there is no equity decrease there is no expense. You will see it clearly with an example.
As there has been no decrease in assets there is no expense, and therefore no item that subtracts from income.
Now suppose that the company returns those same 4,000 dollars of loan plus 2,000 dollars of interest. Your assets would be:
The assets of the company now have decreased: now it is – 2,000 dollars, and that is as a result of 2,000 dollars of interest, which is an expense.