Family loans have the advantage that they are not treated as gifts or inheritances, which would otherwise be taxable. Gifts from parents to children are subject to 15% estate and gift tax. Between siblings, larger cash gifts are subject to full income taxation.
If a business is involved in such loan arrangements – whether under the Danish business taxation scheme (virksomhedsordningen) or through a company (ApS or A/S) – the consequences of lending or gifting funds to family members can be severe. This is sometimes referred to as “triple taxation’’.
Whenever funds are to be loaned or otherwise transferred within the family, it is essential to seek professional advice. Not only must the funds be structured appropriately, but strict requirements also exist regarding documentation, the timing of agreements, and other factors that may prove decisive.
Family loans are often a suitable tool to complement estate planning or to facilitate tax-optimised transfers or disposals of real property.
PrivatRevision is well-equipped to provide guidance on establishing appropriate loan arrangements. Our expertise in tax law, property law, and family law enables us to design comprehensive strategies in which family loans may form one of several elements.
We also assist with simpler loan arrangements, where the primary concern is to ensure that all formalities are properly observed, that signatures are duly documented, and that a professionally insured advisor provides assurance for the arrangement.
PrivatRevision generally charges DKK 1,500, including VAT, per promissory note for loan arrangements up to DKK 1 million. For larger amounts, fees are determined on a case-by-case basis. Promissory notes are tailored to the specific circumstances and signed either before witnesses or using MitID (the Danish digital signature system).
