Repayment of loan to non-relative abroad

Floodzie

Hi,

My girlfriend bought a property recently - she paid for most of it using some of her own funds, and I contributed some of my own cash. In addition to her own money, my girlfriend also got a loan from her sister (who is not Irish and doesn't live here).

The house is entirely in my girlfriend's name (not advisable normally but I understand and accept the risks). I now want to repay the loan to her sister as I earn more money and I feel it is only fair (at the very least, I am not currently being charged any rent). Is there a way to repay the loan without incurring a tax bill for her sister or her?

Should we open a joint account, and I then put money into that, that she can then transfer to her sister? Or does that look really dodgy! :-) We are hoping to get married in the next year - do we wait until after that?

Any help appreciated.

Mrs OBumble

That will depend on the tax laws in the country where the sister is tax resident.

Is the loan documented in any way? What will you get in return for re-paying the loan?

Floodzie

Mrs OBumble wrote: »

That will depend on the tax laws in the country where the sister is tax resident.

Is the loan documented in any way? What will you get in return for re-paying the loan?

Thank you for replying! Her sister lives in Brazil.

The loan is documented as being between her and her sister (this was required so she could transfer the loan without incurring a tax bill in the first place).

By the way, I should mention that the loan from her sister was not via a bank loan - it was 100% cash.

The main thing is - if I were to repay the loan on her behalf, is this counted as her income, and therefore taxable? I will get nothing in return for repaying the loan (apart from a place to live!)

scheister

Few differenent things happening here id say.

You are taking over the loan from the sister no tax issues on Irish side.

What matter is what you do afterwards. If you write the loan off which i assume is the plan. I would think the write off will be seen as a gift from you to your GF.

An alternative may be leave the loan outstanding and as far as your concerned the GF owes you the money. If down the line ye get married write the loan off as a 1st anniversary gift. As it is then a gift between spouses no CAT would apply.

but would consult a professional to make sure im not missing something in my thinking

exaisle

How much did her sister loan to your gf?

George Sunsnow

Surely the money that the sister loaned was already taxed income in Brazil so only any interest paid back on top to her should be taxable
The principle should be repayable tax free in Brazil
I'm not familiar with tax laws/rules there but that's how I'd expect it to be treated here