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Amendments regarding loans to the Law "On Personal Income Tax"

January 08, 2014   •  15:13    •   Category: News

  Starting 1 January 2014, according the changes in the Law "On Personal Income Tax" loans granted to individuals and not repaid within 6 months after the loan maturity date (but not later than 66 months from the loan issue date), will be considered comparable to taxable income and thus subject to PIT. Benefit gained from reduced interest rates will also be subject to PIT at the standard 24% rate, except for loans provided by individuals.

  Under the new amendments in the Law "On Personal Income Tax" , the following loans will be exempt from PIT:

1)  loans for individuals or their spouses or relatives up to the third degree if a loan is issued to cover medical treatment or education costs, supported by the relevant documentation and are used during the period of 2 years;

2)  a loan up to EUR 1,500;

3)  loans where the lender is a credit institution or a savings company that has received a special permit (licence) to provide consumer financing services.

  Individual borrowers must notify the State Revenue Service by 30 June 2014 about non-repaid loans with outstanding amounts exceeding EUR 15,000 per lender as at 31 December 2013. If a taxpayer notifies, a loan received before 31 December 2013 will not be considered comparable to taxable income and thus not subject to PIT. In turn, if the borrower does not notify the SRS, these loans will be subject to PIT under the new amendments to the Law "On Personal Income Tax. 

  If an individual borrower is the lending party’s employee (including a Micro enterprise taxpayer’s employee), management or supervisory board member on the day when a loan is issued, both 24% PIT and the additional 22% rate will apply to the amount of a loan considered comparable to income.