We can borrow money in many ways. We can use the services of banks or parabanks, but some people decide to borrow money from someone in the family. In such a situation, are we obliged to submit a loan somewhere?
Loans are a convenient way to improve your financial condition, but we must always remember that we have to pay back any amount. Many people decide to get a loan from a family member, to be exempt from civil law transactions we have to meet several conditions.
A family loan can be due to many different reasons. Some people did not have creditworthiness, others were simply more convenient to enter into a contract with someone in the family. However, few people still know that tax on civil law transactions should be paid on some loan agreements. The obligation to settle the tax lies with the person who took out the loan – ABC is a tax on civil law transactions, in the case of family loans it depends primarily on the relationship and the amount. So when are we exempt from paying the tax liability and when do we have to pay it absolutely?
Tax and family loan
A family loan is a convenient and more comfortable solution for most people, but you don’t have to pay tax to the tax office for some contracts. Persons from tax group 1 are exempt from this obligation and include: spouse, ascendants (parents, grandparents), descendants (children, grandchildren), daughter-in-law, son-in-law, siblings, mother-in-law, stepmother, stepfather, daughter-in-law and son-in-law. In addition, the amount borrowed cannot exceed USD 9,637. When we meet the above conditions, we do not only have to pay ABC, but we also have no obligation to submit such a loan to the tax office.
The tax exemption also applies to people who have borrowed more than USD 9,637 from their immediate family, i.e. according to the law they are spouses, ascendants, descendants, siblings, stepchildren, stepmother and stepfather. The borrower is obliged to report the conclusion of the contract (form ABC-3) at the relevant tax office within 14 days of its signing.
Loan will be taxed at a rate of 2%
In addition, he must provide proof that will confirm the transaction. If the borrower fails to comply with the above formalities, the loan will be taxed at a rate of 2%. In addition, if it is not reported to the tax office, a person taking credit may be charged a penalty of 20% of the amount borrowed.
Unfortunately, the extended family who intends to borrow over USD 9637 cannot count on being released from ABC. In this case, the borrower is obliged to submit the loan to the tax office and to settle the tax due.
A family loan is a very good solution, but the borrower should always check carefully whether he / she will get ABC exemption. The closest family members are in the best position and they are exempt from tax in any case.