First of all, we understand a loan as the situation in which one party gives money to another with the condition that the same amount is returned.
Lender (gives) – money – Borrower (receives).
From this definition, we can deduce that the main obligation of the person receiving the money is to return the same amount or its economic equivalent, allowing for the return of another equivalent object with the consent of both parties.
Contrary to popular belief, it is generally considered a gratuitous contract, and interest is not owed unless it has been agreed upon (Article 1755 of the Civil Code). If, by chance, interest is present, the only issues to resolve will be whether the stipulated interest is correct and the necessity of taxing such interest as capital gains under the Personal Income Tax.
The formalization of the loan can be done in two ways: elevating it to a notarized document or using a loan contract model between individuals without the need for notarization.
Formalizing this loan through a contract is the most important action regarding it, and it is absolutely necessary for fiscal reasons that we will discuss next.
As we can see, from a civil standpoint, this loan does not generate much controversy; but what about from a fiscal perspective?
Regarding the taxation of this contract, it is particularly relevant that it is a contract between individuals, subject to the Tax on Property Transfers and Documented Legal Acts, which is exempt from taxation (Article 45.I.B, section 15 of the Law on Property Transfers and Documented Legal Acts). This means that it is necessary to inform the tax authorities, liquidating this tax, but no actual payment is required.
This is truly important because if we do not want the tax authorities to interpret that we do not intend to repay the loan and that, therefore, it is a disguised donation to avoid paying inheritance and donation taxes, it is crucial to:
DRAFT A LOAN CONTRACT AS COMPLETELY AS POSSIBLE.
INFORM THE TAX AUTHORITIES OF THIS LOAN CONTRACT.
If we accomplish these two points, we will not have problems with the tax authorities.
The form related to the Tax on Property Transfers and Documented Legal Acts is Model 600.
Some relevant details about it are as follows:
The taxpayer, who must present the tax, will be the beneficiary of the transfer; in this case, the one receiving the loan.
As we mentioned, according to Article 45.I.B of Royal Legislative Decree 1/1993, which approves the consolidated text of the Law on Property Transfers, this loan between individuals is exempt from taxation.
The submission deadline will be one month from the date the original contract is signed, whether it is a private document or has been elevated to a public deed, in the Autonomous Community where the borrower has their habitual residence, submitting Model 600 without payment along with the original document and a copy of the loan contract.
In summary, we have seen that a loan between individuals, whether it involves interest or not, is a legal figure that is very easy to use and a very valid option if a friend or family member needs money.
Additionally, if you need help drafting a loan contract or require more information, do not hesitate to ask me!
