Loan to brother

K

ken v

Registered User
Messages
19
Hi There,

I have the following question, I hope the tax gurus can respond:

Last year in July I lent my brother 7500 euros interest free, to return to me whenever he could because he has not job.
(He is been living in Spain for the last 15 years and got out of job because of the crisis there).

I understand that the fact that the loan is interest free, means that it does not have any tax implications for me (as I don't have any capital gain)
but the revenue will understand that potential commercial loan interest (12%) will be treated as deemed GIFT from me to my brother and will be subject to GIFT tax.
However since the interest would be something like 900 euro, it will be below any GIFT thresholds and does not have any tax implications for him either.

Quoting the revenue website (free-property-loans):

"If the loan is repaid during the year, the date of the deemed gift for that year is the date of repayment."

Is my understanding correct?

I am filling a tax return every year (October 31), another question is if I would need to declare this to the revenue in the next return (or was the previous one??) and if so, how?

I am also thinking of writing off the loan since he will not be able to repay and I don't want him to struggle, would this make a difference?

Thanks again, I hope you can answer me since I am totally confused about this.

Regards,
Ken V.
 
The interest element of the gift is under the annual €3,000 small gift exemption so does not register anywhere.

If you forgive the loan if he has not received any taxable gifts previously from family (other than parents) then he is under the class B threshold and again no issues.

He will need to seek advice in his liabilities in Spain.
 
Hi Joe_90,

Thanks a lot for your answer. It confirms my view.

With regards my tax returns, does this loan need to be declared anywhere?
Or if I waive it as gift? He has not received any gifts before.

Regards,
Ken v
 
This is a short term loan to your brother of a relatively low amount. Even if it is made a gift it is under the exemption threshold so Revenue are not interested.
 
You must log in or register to reply here.
Back
Top