When do we pay tax on the loan agreement and when do we not?

Our tax law is very complicated. Even the simplest things, the simplest transactions and contracts, are associated with the fact that you need to trace complicated tax records to be sure whether you have to pay tax on a given contract or maybe not this time. Should online loans be submitted to the Tax Office? What loans are taxed? This is what you can learn in this text.

Loan agreement and tax obligationsLoan agreement and tax obligations

Each of us will sooner or later find themselves in a situation where they need a little more money. Will it be an opportunity to buy a holiday trip or a car, or maybe just some unexpected expense.

Finding the right loan offer, or talking to family or friends about the possibility of borrowing money, and then signing the appropriate contract, is not the end of the process of obtaining money. There remains a problem related to the Act on tax on civil law transactions.

Online loans are very popular forms of obtaining money. Should online loans be submitted to the Tax Office? Should I pay tax on them? Fortunately, doubts can be dispelled after a while. The Act on tax on civil law transactions says that the conclusion of a loan agreement is connected with the obligation to pay tax, but this obligation does not apply to non-bank customers. The most important thing is to remember that the tax obligation arises when the loan agreement is concluded between natural persons, i.e. between two friends, for example.

Exceptions in tax law

Exceptions in tax law

As in many cases, there will be a few exceptions to the tax obligation on loan agreements. The tax rate on the loan agreement is 2% of the loan value, if the loan is small, this amount will not hurt, however, the penalty, in the event of failure to pay, is as much as 20% of the loan value, which for larger amounts may cause liquidity problems financial. So when should the contract be reported and paid, and when not? It’s best to know the exceptions, and they are:

Loan agreement concluded between persons from the first tax group, i.e. with the spouse, descendant, ascendant, stepson, son-in-law, daughter-in-law, siblings, stepfather, stepmother and mother-in-law.

  • Up to the amount of 9 637, the tax obligation does not apply, however, this applies to all liabilities from the last 5 years.
  • Above the amount of 9 637 you can still be exempt from tax, but only in the case of a contract with specific persons from the first tax group, namely with the spouse, descendant, ascendant, stepson, siblings, stepfather and stepmother.

What about people outside the first tax group, i.e. extended family or friends?

  • Up to USD 5,000 for loans from one person or up to USD 25,000 from several people, of course, this applies to liabilities from the last 3 years.
  • Exemption also applies to loans from the employer’s social fund.

Knowing tax law on loan agreements is really useful and can protect you from unnecessary sanctions.