How the loan between relatives works and how to protect yourself
Loan between relatives without interest is a form of non-interest bearing loan that is disbursed by a private entity to another private individual. Usually the subjects involved in the non-interest bearing loan are relatives. These are therefore loans granted to siblings, parents or children.
There is talk of non-interest bearing financing because interest is not applied. Consequently, the beneficiary is required to repay only the sum granted, without any increase.
Being made by private individuals, this form of loan does not even include opening costs or commissions. Furthermore, there is usually no precise deadline for the refund of the sum.
Although this is not a transaction for consideration, precautions should be taken when taking out a loan between relatives. Security measures that have the aim of protecting both the beneficiary and the provider.
What are they for? Although non-interest bearing loans are a statutory credit access solution, they can be considered an offense by the Inland Revenue. It is possible that the AdE may see the attempt to launder money, or suspect a loan sharking practice in this operation.
It is therefore necessary to be very careful, since all money transactions that take place on current accounts are tracked. Consequently, these operations may be subject to verification by the Agency, especially if they are large movements.
To avoid nasty surprises, such as incurring a tax assessment, you need to take certain precautions before lending money to another person. Obviously we are talking about precautions that are necessary when the loan concerns the passage of substantial sums.
The main risk is in fact the so-called profit meter. Tool that has the purpose of ascertaining the income of a taxpayer, on the basis of its spending power and which could be activated by an expenditure considered suspicious.
Recall that if the value of the loan exceeds 20% of the income received by the beneficiary, the Inland Revenue may ask for a recalculation of the amount due for the payment of the personal income tax (assuming a work activity in the dark) and therefore arrange the related fines.
Why sign a contract between family members
The first thing to know when talking about loans between relatives without interest is that every time a loan is loaned, a real contract is concluded. Contract that is considered valid even if no formal document is signed, and the loan is entered into orally.
The loan, even if we should speak more properly of a mortgage, therefore it is a contract that can be signed not only by banks and financial companies, but also by private individuals. As already mentioned, Italian law does not impose the written form for the loan contract.
In other words, the parties can agree on the refund conditions and sign the contract even with just a handshake. However, it is always advisable to sign a contract in the form of private writing. Document that for greater security should also be registered or authenticated, but it is not essential.
In fact, the presence of private writing can be the solution to various problems that could arise over time. Drawbacks that would be difficult to resolve if the loan was taken out only orally.
For example, let’s say that the borrower decided not to repay the money. In this case it will be necessary to start a lawsuit, but if you do not have a document that demonstrates the conditions set for the loan it may be difficult for the borrower to get the sum back.
If a loan does not involve interest payments, as in the case of a loan between non-interest bearing relatives, it is almost always an operation that has the purpose of helping the beneficiary.
Despite the altruistic purpose that underlies the loan between relatives without interest, it is possible that the movement of money from one account to another generates suspicions to the Revenue Agency. Hypothesis that becomes much more probable if the financing concerns rather high sums.
Therefore it is important that the two parties have the possibility to justify this operation in front of the tax authorities. For this reason it is essential to put the contract black on white, resorting to private writing. Document that, even after many years, can demonstrate that no taxable operation is hidden behind the money concession.
What to indicate in the document
But what are the data to be indicated in private writing? The contract must necessarily indicate:
- the personal data of the parties involved;
- the amount lent (clearly written);
- the methods of reimbursement;
- the rate applied (in the case of non-interest bearing loans equal to zero)
- the wording ” loan agreement pursuant to Art. 1813 et seq. cc. “.
Once all these data have been entered, the parties will need to sign the loan agreement. Not only. The certain date is also required, which we will see later.
Of fundamental importance is the wording “ex Art. 1813 et seq. cc “which must be reported in the contract header. This in fact indicates the type of contract, in this case the mortgage. Why is it so important? The answer is simple, the mortgage is the only form of financing that can be taken out between two private entities.
We also remind you that the interest rate must be indicated only if it is a loan for consideration. In other words, for the loan between relatives without interest it is not essential to indicate the zero rate in the contract, but prudence is never too much.
We also remind you that the two parties may also choose to indicate optional items in the contract. These may concern, for example, the consequences of a possible delay in payments or the purpose of the loan.
How to put the certain date
As we have seen in the previous lines, when signing a loan between relatives without interest with private writing it is necessary to indicate the certain date. But how to get it?
There are several ways to put the certain date on a contract. One of these is to register private writing to the Inland Revenue, a choice that is undoubtedly advisable especially if the financing concerns significant sums.
By choosing to register the loan contract, the contractors incur the following costs:
- a stamp duty of 16 USD for each four sides of the contract;
- a registration tax of 3% of the loan amount in question.
The latter must be paid within 20 days from the date of the loan agreement. When it comes to an interest-bearing loan (therefore it is not the case of the loan between relatives without interest), the registration tax is calculated on the amount disbursed increased by the interest agreed by the contract.
As an alternative to registration, the date can be affixed to the loan between relatives without interest at a post office, or by using an exchange of correspondence by registered letter with return receipt. Among the various solutions to affix the certain date we find that of resorting to the electronic signature of the act, choosing to apply a time stamp.