Family or friendly loan - financing for everyone

Family or friendly loan – financing for everyone

The obligation to announce the loan among individuals, family or friends to the tax authorities is reduced. The exemption limit for advertising has been raised from €760 to €5,000 since September 27, 2020.

The financial loan between members of the same family or between friends is frequent. Compared to a bank loan, this solution offers the advantage of flexibility and ease. You just need to take a few precautions so that a small family or friendly service doesn’t turn into a major misunderstanding that ends up in the judge’s office or…in a tax adjustment.

To get loans between relatives without fuss

It is normal to turn to family or friends in times of trouble. However, precautions are necessary to avoid conflicts…and the wrath of the tax collector.

Prioritize writing

And the wording of the book is a guarantee for those who lend money.

Furthermore it, When the loan exceeds 1500 eurosthe proof that it is a loan can in principle only be made in writing, even if the amounts are paid by check or money order.

You can write a file loan contract signed by both parties, or acknowledgment of debts Signed by the borrower’s sole hand.

Whatever writing is chosen, you must specify that it is repayable loan, indicating the amount, term, terms of payment (in one or more installments), date of payment, interest rate, if any, etc. If the lender collects interest, it must declare it as taxable income.

The debt acknowledgment must always include the amount in numbers and in handwritten letters by the borrower.

When the loan is a large amount (to finance the purchase of a house, the creation of a company, etc.), it is better to ask a notary to draft the loan deed.

Registration (optional) of the loan bond

If the loan is large, it is better to register the loan deed in order to determine the date on which it was drawn up without dispute – make the “date confirmed” in lawyers’ parlance – with the registry office (tax service) subject to the payment of a tax, known as a flat fee of 125 euros.

Recording makes it possible to prove that in the case of a tax audit it is a real loan. Because when the origin of the amount cannot be definitively proven, the tax authorities can tax it as an undeclared donation or as income from an unspecified origin.

Declaration (compulsory) of the loan to the tax authorities

When the loan exceeds 5000 euros (Since September 27, 2020, for €760 before this date), the Borrower is obliged to declare this to the tax authorities by means of Form No. 2062 for submission at the same time as submitting the income declaration to his tax department. But taxes specify that ” IWhen multiple loan contracts per unit amount less than 5 000 € To be concluded within a year In the name of the same religionLender or from the same creditor and that Their sum exceeds 5 000 €, all Contracts concluded in this way should be announced“.

It is highly recommended to keep proof of payment.

Prioritize family peace

Writing a debt contract or acknowledgment also helps avoid family disputes, especially if the loan is given to only one child and the others receive nothing. Know here that it is always possible to make a joint donation at a later time in favor of all the children by converting this loan into a donation, in order to restore equality among the heirs.

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