Is a loan to an employee taxable?

Is a loan to an employee taxable?

Interest-free loan between individuals

Nevertheless, the operations subject to the modality of Onerous Patrimonial Transmissions of the ITP and AJD, and in spite of the exemption, the person who receives the loan (borrower) will have to fulfill his obligation to present the declaration of the tax in which the exemption will be alleged.

This point is important, since in the event that the loans are not declared, the money received may be classified as a donation if it is presumed that it has been given with a spirit of liberality, i.e., without expecting its return, so it would be subject to Inheritance and Gift Tax, which would incur in an unnecessary tax risk of economic significance for the parties involved.

The statement that the granting of credits or loans will be exempt from indirect taxation changes when the loans are secured by real rights such as a mortgage.

Article 15 of the ITP Law establishes that the constitution of guarantees and real rights of mortgage, pledge and antichresis, in guarantee of a loan, will be taxed exclusively for the concept of loan, so that if the guarantee is constituted in the loan, it will also be exempt from Transfer Tax, although the condition is that the constitution of the guarantee is simultaneous to that of the loan, or that in the constitution of the loan, the subsequent constitution of the guarantee is foreseen (Article 25 ITP Regulation).

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Intercompany loan taxation

The Tax Cuts and Jobs Act (“TCJA”) changed deductions, depreciation, expensing, tax credits and other tax items affecting businesses. This side-by-side comparison can help businesses understand the changes and plan accordingly.

Some TCJA provisions that affect individual taxpayers may also affect business taxes. Businesses and self-employed individuals should review the tax reform changes for individuals and determine how these provisions work with their business situation.

Changes to deductions, depreciation, and expensing can affect a taxpayer’s business taxes. Publication 535, Business Expenses, and Publication 946, How to Depreciate Property, explain many of these issues in detail.

A business may deduct up to 50% of entertainment expenses directly related to the active conduct of a trade or business or incurred immediately before or after a substantial bona fide business discussion.

Interest-free loans from a company to a partner

The operations of “loan between individuals” are subject to the Tax on Patrimonial Transmissions and Documented Legal Acts (ITP and AJD), although at the moment they are exempt. This means that the corresponding self-assessments have to be made, but nothing is paid for the tax.

In order to be able to pay the tax, a loan contract must be drawn up. It is not necessary any notarial deed, being sufficient a private document that gathers all the agreements agreed between the parts.

Borrowing from the company

RulingsSharingNon-sharingRulings- Remuneration. Allowable Discounts. General cap 45%. – Remuneration. Allowable discounts. Home purchase – Remuneration. Allowable Discounts. Housing savings quota. – Remuneration. Allowable Discounts. Education Employee, spouse and children. – Remuneration. Allowable discounts. Mutual or employer credits for housing, housing savings, education 30% ceiling. – Education Worker, spouse and children. Employer loan or credit. Discount. – Employer loans or credits. Housing or education purposes. Ceiling Discounts.ORD. Nº4565/9415-nov-2011 Fixes the meaning and scope of the second and fourth paragraphs of article 58 of the Labor Code, incorporated by law Nº20.540, published in the Official Gazette of 06.10.2011. remuneration, discounts allowed, general ceiling 45%, acquisition of housing, housing savings quota,

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