BASQUE COUNTRY AND NAVARRA: Has a partner lent money to their company?

These are the tax consequences of the loan operation

• If the partner making the loan holds at least 25% of the capital, the operation is considered linked, and both parties must tax as if interest were accrued at market value, even if not agreed upon (that is, according to the interest rate that independent parties would agree upon).

• If the amount of the loan is disproportionately high in relation to the capital held by the partner, they will be penalized in their income tax.

• When the interest is payable, the company must withhold 19% on it.

If it is not going to be repaid, convert it to capital

Additionally, it may happen that the loan is maintained for a long period (because the company has difficulty repaying it or simply feels more comfortable not doing so). In these cases, it is advisable to put things in order and, if necessary, convert them to capital. This way, the company's accounting image improves in front of banks (debts are reduced and equity increases) and increases the chances of obtaining financing under more favorable conditions.

Converting the loan to capital can be done through a capital increase by offsetting credits. However, it must be assessed how the remaining partners (if any) are affected and document the operation appropriately.

If your company has received or plans to receive loans from partners, we will analyze the situation with you to propose the most suitable solution from a tax and commercial perspective.