from the contract to Model 600 in the Treasury

loan between individuals - loan between relatives
Guide on the loan between individuals (or between relatives)

In crisis situations, it is very common to turn to family or close friends when, for example, an economic boost is needed to put down a flat, buy a car, pay a credit card debt... The concern arises here with Tax authorities. The Tax Agency places special interest in detecting this type of family loans, also known as loans between individuals, to check if it is actually a "gift" (donation) and not a loan, either with or without interest said loan.

For this reason, in this article we are going to answer questions such as what is better if donating a certain amount to a child or is it preferable to make a loan between individuals. We will also address what information a model loan contract between relatives must contain or what must be done so that the Treasury does not consider it a donation.

  1. Donation or loan between relatives?
    1. Loans from parents to children to face the purchase of a home
  2. Loan contract between individuals: Model
  3. Loan between individuals, Model 600 in the Treasury
    1. Submit Model 600 at the Treasury: what to keep in mind
  4. Do you need legal advice? Request your video consultation

Donation or loan between relatives?

The problem when a father gives money to a son, for example, for a down payment on an apartment, is that if this is not declared, it can draw the attention of the Treasury and sanction for it.

Keep in mind that if it is a loan, you will have to repay the money (with or without interest). If it is money that the father wants to give to his son, it is a donation and you will have to go to the notary to formalize a contract and pay the corresponding inheritance and donation tax. Let us remember that, in most autonomous communities, this tax is discounted and, therefore, the amount to be paid will not be very high.

But if it is a loan between relatives, where father and son agree to deliver a certain amount that will be repaid within a certain period, we find ourselves, as we said, before a loan between individuals. A legally recognized figure within the property transfer tax, in its TPO modality (onerous property transfers).

Loans from parents to children to face the purchase of a home

As we said at the beginning, one of the most common situations for which a father lends money to a son is for the purchase of a home. As is known, in the vast majority of cases, when granting a mortgage, banks lend a maximum of 80% of the requested capital. The remaining amount must be paid by the future owner. This is where relatives often come into play.

This circumstance is similar if it is a loan between spouses or a loan from children to parents. In all these circumstances we are faced with the loan of money between individuals and, as such, a series of actions must be carried out so that, as we said, the Treasury does not consider this act as a donation.

How do donations affect inheritances?

Loan contract between individuals: Model

If the option chosen is a loan, the donation tax is not paid, but so that the Tax Agency does not consider it as such, a loan contract must be formalized between individuals.

As we said, the first thing to do is a contract. It is not mandatory to do it before a notary, it can be a private contract. This loan agreement between relatives must contain:

  1. Date of signing the contract between individuals.
  2. Personal data of the lender (who gives the money, in this case the father) and borrower (who receives the money, in this case the son).
  3. Specify if it is a loan from parents to children at 0% interest, or if an interest is established. Although it is agreed that it will be returned without interest (0% interest), it is important to point it out in the contract. If this information is omitted, the Treasury could make the lender pay personal income tax for a consideration equivalent to the legal interest on the money.
  4. Exact amount of the loan and terms for its repayment. It must also include the way in which the money will be returned. Regarding deadlines, it is very important to define a real periodl, depending on the age of the borrower. For example, an 80-year-old father lends money to his son and establishes a repayment period of 40 years. In this situation, it is very possible that the Treasury suspects a fictitious loan.
  5. Also related to the return of money. It is important that this is done through transfers or bank movements that they record the repayment of the borrowed money.
  6. In the contract you can also establish the possibility of amortization or early cancellation of the loan.
  7. A clause can be added in which the steps to follow in case of non-payment of the loan are established.

Loan between individuals, Model 600 in the Treasury

Once the loan contract between individuals has been made and signed in triplicate, one copy will be kept by the father, another by the son and another must be presented to the Treasury. Specifically, you have to self-assess the tax on property transfers and documented legal acts. This operation is exempt and will not be paid for it, but it is mandatory to present form 600, corresponding to this tax.

Submit Model 600 at the Treasury: what to keep in mind

  • The liable for its presentation is the borrowerthat is, who receives the money.
  • Presents itself in the Tax Office of the autonomous community of the borrower's place of residence.
  • There is a legally established deadline to file this tax. The borrower has 30 days from receipt of the money to go through the Treasury. You must bring the signed family loan contract and fill out form 600.

If you need to consult a lawyer with any questions regarding a loan between individuals, a donation, or, for example, any questions related to the management of an inheritance, request a video consultation with our lawyers.

For 30 minutes, one of our lawyers will answer all your questions and offer you the best legal advice. No need to travel, by video call or by phone.

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