The granting of loans between friends and relatives is a very common practice today. How to regulate the situation to avoid problems both with the tax authorities and with the rules that limit the use of cash?
We start from the premise that a money loan it is a real loan agreement. It sounds strange but it is. Article 1813 of the civil code states that “The loan is the contract by which one party (lender) delivers to the other (borrower) a certain amount of money or other fungible things, and the other undertakes to return as many things of the same kind and quality”.
The term mortgage indicates any form of loan. Both in the case of small loans (such as a sum of money between friends and relatives) and in the case of large loans (such as a substantial sum of money required in the bank to buy a property) we are in the presence of a loan agreement.
If the loan repayment does not provide for the payment of interests (as with most family loans) we are in the presence of a non-interest bearing loan The free of charge. If, on the other hand, the return of the sum of money provides for the payment of interest, we are in the presence of a interest-bearing loan The for consideration.
In both cases, it is appropriate formalize the nature of the loan in writing and this in order not to trigger presumptions of onerousness for the lender since the interests must be indicated in the tax return and taxed.
The formalization of the loan agreement, through a simple private writing which certifies the existence of the obligation, is useful in order to demonstrate the existence of the loan in place in the event of default by the borrower or to defend against any tax assessments.
Very often, in fact, since the subject of the loan are amounts of money of a few hundred euros, we resort to the use of cash and this leads us to think that we are not in the presence of a contract.
What are the formalities for drafting the private agreement? The private agreement between the parties should contain the identification of the interested parties, the amount of the loan operation, the repayment methods, the loan repayment times and the date of the operation (it is advisable to give the private agreement certain date through exchange of certified e-mails between the parties or by affixing a time stamp to the document).
As for the passing of money it is good practice that the same is always done through wire transfers and checks, which have the advantage of being traceable payment instruments (it is always possible to demonstrate through account statements or bank documents the transfer of the sum of money from one subject to another).
Since last July 1, 2020moreover, with i new limits on the use of cash, any amount above € 2,000 must be transferred with traceable forms of payment, even in the case of loans or donations of money between relatives or friends (it is not advisable to circumvent the rules by dividing the amounts donated or lent as any tax assessments may take into account the entire cumulative sum). From January 1, 2022 the limit will descend further, coming to 1.000 euro.
If you decide to make the loan free of charge or for consideration to a relative or friend by bank transfer, it is advisable to use a correct reason. There are no specific rules to follow but it is advisable to motivate the transfer of money with a reason such as “non-interest bearing personal loan of …”, “non-interest bearing family loan of …”, “non-interest bearing loan for my brother Mario Rossi” or equivalent and be able to document and justify the operation in the future.
To conclude, it is okay to lend money to a family member or friend in financial difficulty, but from a legal and fiscal point of view it is a good idea to take some extra precautions to protect yourself.
Antonino Salvaggio – Tax 7
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