Private loan for a condominium
July 28, 2010 | 30,00 EUR | answered by Dipl.BW/SB Ulrich Stiller
I would like to buy a condominium for personal use together with my girlfriend, with whom I am not yet married. Purchase price is 120,000 EUR. We will each own 50% of the property. We plan to pay approximately 20% of the purchase price as equity. The rest we want to "finance" through an interest-free private loan from my parents. We want to make this as a "watertight" contract between us and my parents. We plan to make monthly payments of 500 EUR. The notary suggested during the preliminary discussion that we should consult a tax advisor regarding possible tax disadvantages (for us or my parents). Are there any problems/disadvantages with this situation?
Dear seeker of advice,
Thank you for your inquiry, which I would like to answer based on your information and in the context of your commitment in a preliminary consultation as follows:
Your parents are close relatives within the meaning of § 15 (1) No. 3 AO.
Contracts, including the loan agreement, require special attention from a tax perspective, as they will only be recognized if such contracts are carried out as they would be with unrelated third parties.
Since the notary is obliged to submit a copy of the sale agreement to the tax office, questions from the tax office to you, your girlfriend, or possibly even to your parents are to be expected.
Granting an interest-free loan inevitably leads to gift tax (BFH decision of 14.01.2010 - II B 112/09 (NV) published on 07.04.2010). Therefore, an interest-free loan would be detrimental.
Both the agreement and the implementation of a loan agreement between close relatives must correspond to what is customary between unrelated parties. Therefore, an agreement must be made regarding the term and the method and time of repayment. Interest must also be paid at maturity dates, and the repayment claim must be sufficiently secured in the case of long-term loans, e.g. by registering a mortgage.
You should have the contracts reviewed by a tax advisor. I would be happy to do this for you as part of a mandate, with credit given for the fee paid here. If you are interested, please contact me at my email address StillerStB@gmx.de.
Best regards,
Ulrich Stiller
Tax advisor/Dipl. Business Economist
