Sometimes lending money to friends or family can be expensive. Especially if the Treasury considers it a disguised donation. However, no problems should arise as long as these loans are carried out properly. From Lenders we want to offer you the best keys so that you know how to formalize loans between family members without any type of fiscal pressure. If you want to know more details be sure to read the following article.
Steps to follow to formalize loans between family members
Step 1. Sign a contract between both parties
It does not matter if the loan is made from parents to children, between siblings or a friend. If you want to avoid problems with the Treasury, it is best to write a contract. And if you do not want to get a return on the loan, the contract must be free. What does this mean? That the lender agrees to offer the loan without any interest.
In case of not specifying by contract that it has no interest, the Treasury may think that said loan does contain them. The Treasury could assume that the loan includes interest at the current value of the money. At this time, 3% according to article 40 of the Personal Income Tax Law.
However, as long as you sign a contract and do it correctly, you will avoid any possible problems with the treasury. In addition to avoiding problems with the Treasury when signing a contract, both parties will be protected before possible future claims or defaults. Likewise, both parties will be protected if the debt is to be transferred to an heir in the event of death.
Step 2. Properly write the contract
When writing the contract we can do it in different ways. From looking for models online to hiring a lawyer to be in charge of its writing. In any case, when writing a contract you should never forget:
- Indicate the date and place of conclusion of said contract.
- Indicate the personal and tax data of both the lender and the borrower.
- Specify the total amount owed.
- Indicate the return period and the interest, if any. Be careful with the return terms. They must be realistic. In case of an excessively long duration, the Treasury may think that it is a covert donation. Likewise, the contract should specify the frequency with which the installments will be paid to the lender. These can be of any type as long as both parties agree.
- Indicate possible early amortizations. It is not necessary to specify by contract whether or not to accept the early repayment of the loan. It must also be clearly reflected if there will be a collection of commissions for early amortization, the method of return that will be carried out and, in the event of associated costs, who will bear them.
- That both parties sign the contract on all sides and keep a copy.
Step 3. Leave nothing to chance
It is better that all possible scenarios are reflected in the contract. In this way we will avoid problems with the Treasury or possible confusion between the lender and the borrower. For example, if there are possibilities to extend the return period, they should be indicated in the contract.
Remember that loans between individuals are exempt from taxation. However they are subject to it. What does this mean? That the tax on patrimonial transfers and documented legal acts must be settled, but that nothing has to be paid for it since it is exempt from taxation.
For this, it is necessary to settle the tax by the borrower in the corresponding office using form 600.