Guide
Owner loan to the company
We prepare a correct loan agreement, handle the tax and transfer pricing records, and track the orderly repayment of the loan.
An owner loan is a situation in which a founder or company member lends money to their own company, or the company lends money to the founder, based on a loan agreement. It is a lawful and common way to provide the company with liquidity when working capital is short, without a capital increase and without bringing in new equity. The loan is neither the company's income nor the owner's profit, so the principal itself is not taxed, but the agreement, the interest, and the repayment must all be in order. Since the founder and the company are related parties, transfer pricing rules also apply to this relationship, which is most often overlooked.
What you should know
- A loan is always based on a written loan agreement that clearly defines the amount, the repayment term, the currency, and whether it is interest-free or with interest, because without an agreement the payment can be disputed before the Tax Administration.
- The loan principal is neither income nor expense: when the founder pays money into the company it is not the company's taxable profit, and when it is repaid it is not a cost that reduces the tax base, but is recorded as a liability or a receivable.
- The founder and their company are related parties under the Corporate Income Tax Law, so transfer pricing rules apply even to an interest-free loan, along with the obligation to show it in the tax balance and the transfer pricing report.
- If the loan is interest-free or carries below-market interest, an arm's length interest is calculated in the tax balance, based on the interest rates prescribed each year by the Ministry of Finance or on the company's own analysis of comparable market rates, which can increase the tax base.
- When the company lends money to a founder who is a natural person, special care is taken that this is not a disguised payout: an interest-free or favorable loan can be treated as the founder's income and trigger personal income tax, and an unrepaid loan as a hidden dividend.
- All payments and repayments go through the company's bank account so the trail is clear; repayment in cash or by set-off without documentation and unrealistic deadlines are the most common reasons a loan is challenged in an audit.
How we handle it
- 01 Assessing the need and direction We determine whether the founder is lending to the company or the company to the founder, and assess whether a loan is the best option compared to a capital increase or a bank loan.
- 02 Preparing the loan agreement We prepare a written agreement with the amount, repayment term, currency, and an interest clause, compliant with regulations and safe in a possible audit.
- 03 Bookkeeping and records We post the inflow and repayment as a liability or receivable through the bank account, so the principal does not enter the company's income or expenses.
- 04 Interest and transfer pricing For interest-free or favorable loans we calculate arm's length interest and prepare the presentation in the tax balance and the transfer pricing report.
- 05 Tracking repayment and deadlines We monitor the contractual deadlines and the repayment through the account, and warn you in time if the arrangement risks being treated as a disguised payout.
- 06 Advice and corrections We advise you on a safe amount and schedule and, if needed, prepare annexes or corrections so the loan stays orderly and tax-safe.
Company formation
We register your company with APR and handle all tax and banking obligations.
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