Overview of Family Loan and TaxUncategorized
Last year’s survey conducted for Blue Media shows that Poles most often go into debt with family, friends or acquaintances. They direct their steps to banks or loan companies only when this possibility is exhausted.
The “How do we borrow money” study showed that we first ask for money for the family (63%) and friends (47%). A loan in the bank was declared by 28% of respondents, while in loan companies – 9%. Loans from loved ones are usually small amounts that are easy to pay back or a way to finance emergency expenses in emergency situations.
However, it is worth remembering that when borrowing larger amounts, a tax should be paid in accordance with applicable law. There are, however, some exceptions to this rule. When can you borrow from relatives without having to comply with additional formalities and on what amounts should you pay tax?
Under current law, every private loan is subject to a 2% tax on civil law transactions (PCC). However, it is worth knowing that there are also exemptions from this tax. The tribute does not have to be paid by persons who have borrowed sums totaling USD 9,637 in five years from their immediate family.
This applies to loans from one person. Indebtedness for higher amounts may also be exempt from tax, provided that this fact is reported to the relevant Tax Office and documented. Pursuant to Polish law, a spouse, children, grandchildren, great-grandchildren, parents, grandparents, great-grandparents, stepchildren and siblings are recognized as the immediate family.
This rule does not apply to loans between in-laws, son-in-law and daughter-in-law. In practice, this means that a loan from parents, brother or sister up to USD 9,673 does not have to be reported anywhere.
Family loan – tax on higher sums
If the sum of the amounts borrowed from one person within five years exceeds USD 9,673, you must pay tax on civil law transactions, but this can be avoided. How? First of all, you must submit the PCC-3 declaration on the tax on civil law transactions to the competent tax authority within 14 days from the date of the loan. In addition, the person taking out the loan should document this fact.
That is why it is advantageous in the title of the transfer made by the lender that it is a family loan. So you can enter, for example, “a loan from parents” to make it easier for the Tax Office to prove that it is money borrowed from close relatives. This option cannot be used by borrowers from their parents-in-law, son-in-law or daughter-in-law, because in this case there are no blood ties, hence the release is not justified.
Family loan tax – pay or not?
It happens that some conceal that they have borrowed more than USD 9,673 from one person within five years and do not report this to the Tax Office. It is worth remembering, however, that in the event of an inspection, the office may demand payment of overdue tax, but not in the amount of 2% of the borrowed amount, but 20%.
This obligation lies with the borrower, and taking into account the fact that it is possible to take advantage of exemptions after submitting the relevant declaration and documenting the loan itself, it is not worth concealing this fact from the Tax Office.
Tax on a loan with friends
Loans from friends or acquaintances are also subject to a 2% tax on civil law transactions. The exception is when we borrow money from one person in an amount not exceeding USD 5,000, or USD 25,000 in the case of loans from many people received in three consecutive calendar years.
However, if you do not want to borrow from relatives or friends, you should look for another solution. A good way to quickly raise funds for any purpose is a loan in Richard Feverel – transparent rules, the ability to split repayment into low installments and short waiting time for money makes it a great alternative to a family loan.