Tax on Loan Profit

[segsoha]

I have an opportunity to loan some money with someone, who will be investing it in overseas proprty. They have promised me a 15% return on the money (via a Promissory note). Would this profit be taxed as CGT @ 20% ?

 

[capall]

What would make it a capital gain? It would be treated as interest on a loan,income tax

 

[webtax]

15% over how long a period? is it dependent on them making a profit? are you getting any security for your investment?
remember you will be paying tax @ 41% (plus prsi/health contrib) on your interest income so weigh up the risk/return carefully.

 

[nmh001]

so you're putting up the money for this person's property investment? a bank doing that would insist on a legal charge over the property in the event that the person defaults on repayment (ie, a mortgage). you'd be crazy not to look for the same thing. a promissory note without any way to enforce it to get your hands on the asset is useless. of course you've only given very brief details and there could be all kinds of issues. my advice to you would be very careful especially if family/friends involved. its all fine until something goes wrong...

as for tax, it should be possible to structure this so that your profit is taxed at 20% but NOT if you structure it as interest on a loan. also technically the person who pays you the interest has a withholding tax obligation.

get professional advice