Soft loan may be taxable gift

Did you know that if you grant a loan to a person at an unreasonably low interest rate (or even without interest), the tax authorities assume that this is a taxable gift under the Inheritance Tax Act?

It is therefore always recommended to obtain a comparative offer (e.g. from a bank) before granting the loan.

If this is not done, the tax authorities assume (for simplification) an arm’s length interest rate of 5.5% per annum. If the interest rate determined in this way is higher than the agreed interest rate, the difference constitutes a gift under the Inheritance Tax Act.

It should be noted that for unrelated persons as well as siblings there is only an allowance of EUR 20,000 in 10 years. If this amount is exceeded due to the waiver of interest, gift tax will be assessed. For married couples the tax-free amount is EUR 500,000 and for children EUR 400,000.

If you have any questions, please contact us. We will be happy to advise you!

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