Can you provide an interest-free loan to one of your children?

Question for an expert

I want to lend money to my son, do I have to charge him interest?

If a loan of more than 1,500 euros is granted between individuals, including in a family context, it is required to formalize it in writing. This can take the form of a loan agreement signed by the lender and the borrower or an acknowledgment of debt signed by the borrower himself.

It formalizes the borrower’s willingness and obligation to repay and establishes the details of the loan – duration, rate, repayment conditions. They are loosely defined between the two parties. It is therefore quite possible to provide a loan for free, without interest.

However, it must be evident from the characteristics of the loan that the intention was to provide a loan, not a gift. For example, the duration must be realistic and allow for repayment before the death of the creditor.

If the repayment terms are too different from those of a traditional loan, there is a risk that the loan will be reclassified as a hidden family donation. Gift tax may be due.

The borrower must state loans of more than 5,000 euros in his annual income tax return (form no. 2062, “loan agreement statement”). In addition, it is strongly recommended to register the loan agreement – which must be done at the registration department of the tax administration in the place of residence. It makes it possible to prove the date and existence of the contract in the event of a dispute, especially in the event of the death of the creditor. Price: 125 euros.

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