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Money loan agreement from parents

In today’s article I will describe the issue of borrowing money from parents and other family members, I will mention how to avoid paying 0.5% PCC tax on a loan, I will also add two templates of the loan agreement, the first one is: a loan agreement from the parents and the second is: a loan agreement from family members.


Borrowing from the family

Borrowing from the family

The current loan market is literally full of all sorts of solutions. In addition to loans available in banks’ offers (including credit cards and revolving limits), we can also use solutions such as loans at loan institutions (typical ‘payday loans’, installment loans and increasingly popular loan lines, which are a kind of equivalent of revolving limits offered) by banks).

In addition, we also have a wide private loan sector at our disposal.

An alternative option to the above mentioned solutions may be a loan from parents. It is worth noting that in many respects it is also a much more profitable option, especially since Polish law provides in this case the possibility of using many additional options, allowing, for example, to avoid paying tax, which we are theoretically obliged to pay .

However, it is worth realizing that by borrowing money from family, including even our own parents, we are by no means exempted from having to comply with several formal requirements.

Polish law quite precisely regulates the issue of loans between private individuals, including loans between family members.

If you try to circumvent these formal requirements, you may be exposed to really unpleasant consequences, especially from the Tax Office.

Of course, the issue that arouses the most interest in this case is the issue of parental loan and tax, ie the possible need to pay tax. However, this is still not all.

What else is worth remembering in the case of a parent loan and what specific formal requirements should we take into account in order not to face legal consequences? Let’s look at this issue a bit thorough.


Parent loan: basic information

Parent loan: basic information

First of all, it should be remembered that from a formal point of view, a loan from parents is also a loan like any other. This means no less and no more than that a necessary loan agreement is a necessary element of borrowing from the family.

In the event that we borrow money without such a contract, from a legal perspective we are dealing not with a loan but with a donation, which involves completely different conditions, for example regarding a possible tax liability.

Apart from this fact, a parental loan agreement should contain, first and foremost, some basic information, namely:

  • data of the parties to the contract (lender and borrower),
  • loan amount,
  • repayment period and date of the contract.

If the loan bears interest, the contract must, of course, also include information on this subject, ie about the interest rate and the final amount to be repaid (if the interest rate exists, the amount will be different than the loan amount itself) .

The loan agreement between family members should also contain information on the degree of kinship between the parties to the loan (this is not a mandatory legal requirement, but it is worth including this point in the agreement, because in the event of any future doubts on the part of the Tax Office, it will work in our favor)).

The contract should be drawn up in two identical copies, signed by both parties, ie the lender and the borrower. The parental loan agreement need not be confirmed with a notary public.


Parental loan and tax

Parental loan and tax

Under current Polish law, a loan from a family member is taxable. But how does this issue look in detail?

Basically, Polish law imposes on all private loans the obligation to pay PCC tax in the amount of 0.5% of the value of loans.

However, loans between family members are a special case under domestic legislation. First of all, we are dealing with a statutory tax exemption if the loan between family members does not exceed USD 9,637 within 5 years, provided it is a loan from one person. A loan from parents that does not exceed the amount mentioned above does not have to be reported to the Tax Office.

However, what if the loan amount is for example 10 or 20 thousand dollars? In this case, theoretically, the obligation to pay the PCC tax remains in force.

However, this condition can be bypassed. It is enough to report the existence of such a loan to the relevant Tax Office. However, for the Tax Office decision to be beneficial to us, the loan agreement must be drawn up correctly, ie in accordance with the requirements listed above.

It is worth adding that the above-mentioned information to the Tax Office about a loan agreement for an amount exceeding USD 9,637 must be made by submitting the PCC-3 declaration within no more than 14 days from the conclusion of the loan agreement.


A loan from a family

family loan

How to complete the PCC-3 declaration? it’s not that difficult at all, even though the declaration consists of three pages. First of all, fill in only the white boxes! The PCC-3 declaration can be completed in 3 ways:

  • on the machine,
  • on the computer,
  • by hand (with a blue pen).