How private loans work at tax level

Today there are many financial alternatives to banks. From private equity companies to private lenders. Each of these options has its consequences at the fiscal level. Although it is likely that you have never considered it. For example, do you know how loans between individuals work on a fiscal level? If you have no idea, don’t worry. In Particular Lenders we clarify it for you. Continue reading.

Loans between individuals

Loans between individuals

Before explaining what the fiscal consequences are, it is important to be clear about what a private loan is. We speak of this modality at the moment in which a financial relationship is established between two parties. The lender, a natural person, offers capital to the borrower. In this way a contractual relationship is created where limits and characteristics of the financial agreement must be set. From repayment terms, through interest, possible commissions and duration of the loan. Without forgetting, of course, to agree the amount between both parties.

It is essential to create a contractual relationship

Although today the Law does not contemplate a specific type of contract when a private lender offers money, it is necessary that the agreement be reflected by contract. This way possible problems are avoided in the long run. All the characteristics of the loan must be reflected in said contract. So much:

  • the amount to lend,
  • such as the return period and fees,
  • possible interests,
  • The extraordinary characteristics of the agreement. As for example possible commissions for delay or partial or total early amortization.

For the process to be well established it is necessary to sign it before a notary.

How private loans work at tax level

How private loans work at tax level

Now that these details are clear, it is time to find out how loans between individuals work on a fiscal level.

According to article 45 of Royal Decree 1/1993, loans between individuals are exempt from having to pay the tax on documented legal acts. And the tax on capital transfers.

Precisely this exemption has led to abuses taking place over the years. Many people cover donations in the form of private loans to avoid having to pay those taxes.

That is why it is so important that it is clear that when making this agreement it is being done from the strictest legality. Regardless of whether it is a loan with a lender or with a friend or family member. In all cases it is recommended to sign it before a notary and present it later to the Treasury. In this way the contract is reflected and there are doubts about its legality. Thus, the tax administrations will have no doubt that it is really a loan between individuals.

It does not matter that it is an interest-free loan with a very long repayment term. As long as all its characteristics are reflected in the contract, a capital return link will be established between both parties. This will show that it is not a donation.

Did you find this information interesting?

Did you find this information interesting?

In that case we encourage you to take a look at the news section of Private Lenders. Here you will find more interesting information on economics, finance and economic news. For example:

  • Are there interest-free loans?
  • APR and TIN: two essential acronyms when requesting a loan
  • What is the legal interest in money and what is it for?

Loans and loans with bills of exchange who pay them in 2020

Well, if these are the questions, you are in the right place! What is this page for? Specifically, this is an entry page towards a whole series of institutions, both institutional and non-institutional, which in various capacities deal with the foreign exchange loan granted in Italy and which basically aims to answer a final question: how to obtain a loan with promissory notes in 2020?

Offers a loan with payment in bills

Offers a loan with payment in bills

Being the main access from which to start, here you will not find, on purpose, any person, whoever he is, who offers a loan with payment in bills as we have decided to divide everything into distinct sections. Which and why? Let’s see.

Who offers loans with return or repayment in promissory notes 2020: unlike many and other sites, which usually highlight everything on a single page, We at Personal Finance.it have chosen to divide those who make loans with promissory notes based on the subject that dispenses. Someone will ask themselves the following question: “. oh well, divide it as you want, but always loan with bills is!” Well, that’s not quite the case. So, the subdivision consists of four parts (4 pages), each of which indicates a specific type of financing with bills: to be precise, it goes from the letter “A” to “D”. Why such a subdivision?

The point of dividing a loan with bills in this way

The point of dividing a loan with bills in this way

The Reader may continue to wonder “. what is the point of dividing a loan with bills in this way?” A: The sense is as follows: to divide the loan with promissory notes by giving a sort of rating (one vote) based on who is treating them is certainly useful for those who want to access this form of residual credit. Therefore, we start from A which represents the “best” loan with bills of exchange both for feasibility and for rates applied, passing from B and C to get to D in which ” potentially ” the loan with bills is theoretically more risky and problematic.

Banks that make loans with bills of exchange: they are not many, but certainly, as much as they grant it, they do it at the best conditions compared to other grantors as they disburse their own money (rectius: of customers). Check them out on: banks that make loans changed. Financials that issue loans with bills of exchange: these are even fewer than banks, but where there are loans with bills of exchange although at a higher cost than the bank: financial ones that grant loans with exchanges

Agencies that make loans with bills: known with the name of agents in credit brokerage, they are the dominant numbers also for disbursements, but by mediating money from others the costs still rise: agencies that make loans with exchanges

Loan with bills of exchange between individuals: it is natural, by visiting the page, you will not find the name and surname of any individual who makes loans with bills rather a series of tips and attentions on how to avoid risks, rip-offs: loan with bills between serious individuals.

Loans and retired loans without assignment of the fifth

Loans for pensioners without assignment of the fifth

Loans for pensioners without assignment of the fifth

Who has landed on this page, is probably a pensioner who has been refused the assignment of the fifth relating to his/her pension. However, as the title suggests, there are cases in which it is the pensioner who freely chooses not to give up the fifth while being able to do it. Let’s recap the reasons for seeking alternative solutions to the transfer of the fifth: 1) they cannot give the fifth in how much we fall into one of the cases for which the law provides for the exclusion of the assignment; 2) we could sell it, but at some point it becomes uneconomical compared to other forms of financing; 3) we want to obtain a larger amount, which cannot be reached by the transfer of the fifth.

Now let’s analyze the three cases, in particular the first one, trying to suggest alternative solutions. Let’s start with the first hypothesis which is the most important as it concerns millions of Italian pensioners, i.e. all those cases in which it is not possible to transfer the pension and for this reason forms of credit are sought without assignment.

Loans to pensioners with non-transferable pension

Loans to pensioners with non-transferable pension

This is the first case. NB: a series of pension and/or social security and/or welfare treatments are included, regardless of the monthly received (it does not matter whether high or low) or the age of the pensioner as non-transferability is excluded from the current reference laws.
A) Family allowances: these, if paid to pensioners, cannot be transferred; B) Monthly allowances for assistance to pensioners for incapacity: this is essentially the accompanying allowance for which the transfer is precluded; C) Pensions and/or social allowances: these are loans for pensioners with social allowance which, by 2020, is equivalent to 459.83 USD per month, but which from this year (2020) can reach up to 780 USD per month as a supplement the minimum citizenship pension introduced by the Yellow-Green Government, if the requirements are met.

Loans for pensioners with a social pension follow, which instead, again in 2020, is equivalent to 378.95 USD per month: even from 2020, subject to requirements, it can reach 780. In both cases (C and D), they would no longer be non-transferable if above the minimum pension threshold, as we will see below; D) benefits for the exoduses required by law no. 92 of 2012; E) the owners of Ape Sociale (not the voluntary one); F) Loans with a civil disability pension ? Warning! We do not confuse civil disability with work-professional disabilities. Civil disability retired loans: what does it mean? These are welfare services that are released from work and as such cannot be transferred! While all related disabilities deriving from work may be subject to assignment of the fifth, but only under certain conditions, to see which you go on assignment of the fifth with disability pension. Let’s move on to the second case: it occurs when the transfer of the fifth is no longer convenient. As per the premise, there are cases in which, although the pensioner can freely give up the fifth, it is preferable not to give it and seek other financing. These cases are almost always related to the retiree’s advanced age and which make the transfer very expensive as described on loans for retirees up to 90 years to which the interested parties refer.

Loans for pensioners with minimum pension

Loans for pensioners with minimum pension

This is case no. 3 and which affects millions of Italian pensions. Did you know that in mid-2019 out of 18.1 million pensions paid in Italy, as many as 64% of these are under $ 750 per month? Well, it is precisely to these that the third form of financing is addressed to pensioners without transferring the fifth, directed not so much to obtain the financing but to increase it. So, there is a rule, known as ” safeguarding the minimum pension “, which establishes that it is not transferable, in fact, the fifth under a minimum threshold, which for the year 2020 is equivalent to 515 USD. Attention: the aforementioned sum does not refer only to the monthly received by the pensioner but in any case to the minimum sum which must remain net of the deduction deriving from the assignment: it cannot fall below this threshold. In these cases we speak NOT of assignment of the fifth, but up to a fifth that is different.

Let’s take an example of calculation for 2020, which is better than a thousand words: a pensioner, net of social security and tax deductions, has 600 USD per month. Strictly speaking, it could yield $ 120 (1/5 or 20%): and instead not! It can only sell $ 85 which is 14.2%, no longer 20%. In fact, if we subtract the $ 120 from the initial 600 we reach $ 480, that is below the threshold of the minimum transferable pension (515) which must be integrated: how? By lowering the installment that will drop from $ 120 to $ 85, as the minimum pension threshold will not be affected with $ 85 (600 – 85 = 515). This is why we said “up to a fifth”. The problem of loans with a minimum pension is that which does not allow you to obtain certain amounts: with current rates and even wanting to take advantage of the maximum amortization period (10 years) it is difficult obtain loans over 6-7 thousand USD.