How to lend money to a family member or friend? Avoid problems—idealista/news

2023-10-29 17:00:03

Leaving money to a family member or friend It is a very common operation: for example, lending money to a child to buy a home, to get a vehicle or to face an economic downturn. In all these cases we are faced with a loan between individuals, which we must formalize both to avoid possible problems related to its return, as well as with the Treasury.

For this type of operation to develop without risks, take note of how to leave money to a family memberhow to formalize a private contract and how much must be paid to the Treasury.

Can I lend money to a family member?

And loan between family members It consists of the delivery of money by one or more natural persons to another or others (for example, by parents to a child), with a personal and family bond existing between them that may be more or less close.

This is a type of private operation where no banking entity intervenes. This implies, among other things, that the conditions of this loan can be freely agreed upon, always within the law.

The most normal thing is to establish a period and method of repayment, at least approximate, so that the lending party is not harmed.

The purchase of a home, the financing of a new business, a small help to overcome an economic downturn or a situation of unemployment, the purchase of a car… These are some of the cases in which it is most common to occur. loans between family or friends.

How to lend money to a family member

No matter how close your relationship is with the borrower and no matter how much you trust that the repayment will be carried out as agreed, You must always formalize the operation through a private contract, in writing and with the signature of all parties involved.

In this way, you will get:

Establish clear conditions, establishing aspects such as the application or not of interest, as well as the form and term of repayment of the money lent. This will allow you, if necessary, to assert your rights before a judge.Avoid problems with the Treasurysince you will have documentary support that demonstrates that the operation carried out does not constitute a donation.

How to make a loan contract between family members

He loan agreement between family members must contain certain minimum information:

The contract formalization date.Las parties involved in the operation, that is, the lender (who gives the money) and the borrower (who receives it and is obliged to return it). The presence of guarantors is not frequent in loans between family members. amount lent.He term and method of returnwhich can be produced in full or in installments, with different frequency and in different amounts. Where appropriate, the applicable interest and commissions. If interest and/or commissions are not going to be charged, this must be made explicit in the contract to avoid problems with the Treasury.

Also, keep in mind that you must declare this operation before the Treasury. and provide the signed contract. This will not entail any cost, since the operation is exempt from the Tax on Property Transfers and Documented Legal Acts (ITPAJD).

Keep in mind that it will always be a good idea for both the loan and the partial or total refunds of money to be perfectly traceable. One way to achieve this is to make them through bank transfer, mentioning in the concept of the transfer that it is a delivery/repayment of the loan. In this way it will be very easy to know the origin of each transfer, its recipient, the reason and date of completion.

Should interest be charged on a loan between family members?

The decision to charge or not interest on a loan between family members It is personal, although most often it is not like that.

It is common that, since what it is about is helping a close person at a given time, this type of loan is carried out without any price or cost for the person who receives it.

If interest is charged, keep in mind that this will be limited by the laws in this regard. In general, any interest rate that triples the normal interest rate on money will be considered abusive. In the case of late payment interest, the maximum interest rate that you can charge will be the equivalent of 2.5 times the normal interest on money.

When do you have to declare a family loan?

If you wonder How much money can a family member lend you without declaringyou should know that it is always mandatory to declare any operation of this type before the Treasury, given that it is an operation subject (but exempt) to the ITPAJD.

Specifically, the borrower must present the model 600 for the self-liquidation of the operation (which will have a zero cost thanks to the applicable exemption) within a period of 30 days from the formalization of the loan. This way you will also prevent the Treasury from considering that it is a hidden donation.

Legally, any operation must be declared, although it is often said that the bank will not report movements of less than 10,000 euros.

How much is paid to the Treasury for a loan between family members?

The general rule tells us that the formalization of loans between individuals, including family members, will be subject to, but not exempt from, the ITPAJD. Therefore, you will not have to pay anything for this concept.

Only in the case of collection of interest and commissions will you have to declare this gain in your personal income tax, as a lender. On the borrower’s side, you will be able to deduct the expense corresponding to the price of said loan in your income tax return.

When is a loan between family members taxed in personal income tax?

The normal thing is that a loan between family members free of charge, that is, without charging interest or commissions, is not taxed in personal income tax, since none of the parties will benefit from the operation:

On the one hand, the borrower will have to return the money in full, so there will be no enrichment. On the other hand, the lender will receive the money delivered in full, so he will not gain anything from the operation either.

As to How a loan between family members with interest is taxed in personal income taxIn these cases, the person who receives them (i.e., lender) will have to declare the benefits thus obtained, which must be included as income from capital in their personal income tax return. The borrower, for its part, interest may be deducted.

Loan between family members and donation

It is important to be clear about what the difference between family loan and donation given that, in the case of a donation, it will be necessary to declare this operation and pay taxes on it, while in the case of a loan the operation must be declared but will be exempt. Furthermore, the taxes applicable in each case are different:

The donation It consists of the delivery of money or any other type of good free of charge, that is, without expectation of return and without any price. This operation must be declared and is taxed differently depending on the autonomous community. In this case, you are taxed by the Donation Tax.In the case of a loan, a delivery of money occurs in exchange for its future return, agreeing on some reimbursement formula that may or may not involve the payment of interest or commissions. In this case, the operation will be subject to and exempt from ITPAJD.

Keep this in mind because, In the case of a donation, the Treasury could force you to pay taxes for this operation if you have not done so voluntarily. This would also apply if you decide to forgive part of the loan.