Loans, as a rule, are subject to income tax and tax on civil law transactions. What’s important – the lender is obliged to pay tax at the rate of 19% on income obtained from the loan interest, and the borrower is obliged to pay tax on civil law transactions. In addition, there are many situations in which those taxes will not occur or i.e. VAT may be applied .
The lender receives income when he recovers the amount of the loan plus accrued interest. Interest is the actual income of the lender, which are subject to a tax at the rate of 19%. In the case of borrower tax on civil law transaction amounts to the rate of 2% and the tax base is the amount of the loan. The tax must be paid within 14 days from the conclusion of the loan agreement to the tax office.
As was mentioned in the introduction, there are some situations in which tax on civil law transaction will not be due.
The first of it, takes place when the loan agreement is concluded between persons belonging to the 1st tax group (i.e. the closest relatives – spouses, antecedents, descendants, siblings, parents-in-law etc.), In accordance with the provisions of the Tax on Civil Law Transactions Act, loans are exempt from tax in the event of a contract concluded between persons belonging to the 1st tax group if the amount of loan does not exceed non-taxable amount specified in the regulations of Inheritance and Donation Tax Act.
Secondly, if the loan agreement is concluded abroad, and money are on a foreign bank account, tax on civil law transactions will also not be due.
Other exceptions allowing to avoid tax are loans up to 5000 PLN from one entity (other than 1st tax group) or up to 25000 PLN from several entities over three consecutive years.
CGO Legal Law Firm offers consulting services concerning loan tax matters. We assist in completing the relevant tax returns and we prepare models of tax optimization of loans.
Feel free to contact us, if you are interested in learning more details.