Private loans - these are the tax rules

Private loans - these are the tax rules (préstamos particulares)

A hundred euros for the fix of the washing machine or a grant for the new bed - for many individuals it's anything but a

problem to help other people with a small loan. When it comes to higher amounts that cannot be reimbursed promptly, the

the loan should be recorded in a contract. On the off chance that lenders request interest, they must be included in the tax return.

This also applies to personal loans by means of online credit portals. New: If the borrower goes bankrupt, some portion of the money can be recovered through the tax return.

Specify income from a personal loan yourself

Interest gains from a personal loan, similar to those from different investments, are subject to the level tax of 25 percent plus solidarity surcharge. For chapel members, the tax burden increases by the congregation tax. Unlike in the case of investments through a normal bank, the lender must ensure that his income is taxed himself. He does

this retrospectively in his income tax return (all details on the tax return can be found in our ?special tax 2020 financial test). To do this, he specifies the interest income in line 14 of the KAP Appendix. The tax office then calculates the taxes due on the tax assessment. The authority naturally takes into account the

saver's singular amount of EUR 801 (EUR 1,602 for wedded couples) if this has not as of now been used up by other investments in banks, building societies or fund companies. Withholding tax is only payable after this.

Personal loans on the Internet

For some years now, investors have also been ready to grant loans to private borrowers on numerous Internet portals such as Auxmoney, Smava, Viainvest or Mintos and earn money through the interest. The internet platforms

use an intermediary bank to process the lending business, however the lender has to deal with the taxation of his interest income himself. The online representative totally stays out of taxation. Investors only get a endorsement of interest earned from him. You specify this in the KAP Appendix to your declaration.

Fees often apply to the credit business portals. Auxmoney demands a one-off payment of 1 percent of the

investment amount, Smava 1.35 percent. As with different investments, they are as of now compensated with the saver single amount and may not be deducted as advertising costs.

Personal loans abroad

Portals such as Viainvest and Mintos also agent personal loans to borrowers abroad. For Spain investors, this

can mean that foreign taxes on interest income, known as withholding taxes, are deducted. For instance, if a loan goes to the Czech Republic or Lithuania, the withholding tax for private individuals is 15 percent, in Latvia

and Poland 20 percent. These tax deductions can only be evaded or if nothing else diminished by a residence authentication transferred to the investor profile before the first loan transaction. Taxpayers get these from their tax office. In the event that loans are granted in different countries, a separate testament is required for every country. (Capital privado)

Settling withholding tax

The foreign withholding tax retained is entered by investors in their annual accounts with the Spain tax office on Appendix KAP (page 2/line 52). The tax office then offsets these amounts as a down payment on the level rate

tax due in Germany. To demonstrate the withholding taxes retained, investors must give an endorsement from the gateway or the bank statements.

The twofold taxation agreements between the Federal Republic and the source states control the most extreme possible tax credit. It can happen that not all withholding taxes are acknowledged as qualified by the German tax office - then you need to apply for a refund abroad. You can peruse increasingly about this in our Special ?Withholding Tax on

Foreign Shares .

Lenders - in the eyes of tax investigators

No issue whether a loan to a friend or to a stranger by means of an online gateway, lenders should not cover up their interest income in the tax return. Anyone who is subsequently exposed here risks being fined for tax evasion.

The taxes retained from the state must be paid anyway - in the worst case, as long as ten years retrospectively and plus 6 percent interest.

The risk of discovery is especially high with the credit portals. Tax investigators consistently focus on the

Spain online credit exchanges. The portals are obliged to disclose identity, investment amounts and interest income generated by individual savers when asked by investigators - there is no banking secrecy. , foreign partner banks of the credit portals have also been obliged to carefully report interest income

from German investors. The exchange of information now takes place with over a hundred countries around the world.

Borrowers can save taxes

A loan between friends or relatives should be recorded in writing. Not only to stay away from disputes later, however

also to show the tax office that the loan was seriously wanted and was granted like a stranger. Exceedingly important details of the loan should be obviously defined in the contract - this includes regulations on the amount of the

loan, payment, term, interest and repayment arrangements.

The borrower can also benefit from this: While the lender has to make good on taxes, he can save taxes with the interest paid. In the event that he uses the obtained money to invest in his apartment building, for instance, he can deduct the interest https://www.agilcredit.es

from the tax. This saves up to 45 percent income tax, while the lender only pays 25 percent level rate tax on his interest income. The Federal Fiscal Court declared this to be lawful in three groundbreaking judgments.

The prerequisite is that the lender and the account holder are financially independent of one another and that the the account holder could obtain the loan elsewhere. In the case of spouse loans, the positive level rate tax rate does not apply, for instance, in the event that one financially dominates the other. The Federal Finance Court previously chose.

In the dispute, the husband had given his well off spouse a completely financing loan to purchase and  renovate an apartment building. According to the court's ruling, he needed to pay tax on the interest earned on the

loan at his income tax rate.

It is best to concur on the usual interest

In the case of exceptionally high loans to friends, customary market interest rates - around 5 percent - should be concurred. Otherwise, after the tax exemption for donations of 20,000 euros has been used up, the tax office can assess the lost interest income as a blessing and ascertain blessing tax for this.