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Compayn Tax on Preferential Loan

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  • 05-08-2020 10:21am
    #1
    Jonny303
    Registered Users Posts: 633 ✭✭✭


    Hi, just a quick query.

    If I was to take a loan from my Ltd company (say €10,000) and rather than pay the BIK on a 0% loan, pay the full 13.5%, how would this be taxed on the companies earnings end?

    They're making a profit of €1350 for a year on it, would it be just taxed as normal income or would it be passive income and pay 25% on it regardless if the company is in profit or not?


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    #2
    tax_tutor1
    Registered Users Posts: 109 ✭✭tax_tutor1


    The interest income would be passive income for the company and liable at the 25% CT rate.
    If the company had a tax trading loss in the same accounting period then that loss could be available to reduce/eliminate the tax on the interest income .
    The company would also have to pay 20/80's of the loan balance to Revenue until the loan is repaid or written off by the company. Any write off would have personal tax implications for the loan recipient.
    The company could also have a surcharge exposure-additional tax on the after tax interest income @ 20% unless there are trading losses or the company makes a distribution (usually a dividend).


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