Can you give an interest-free loan to one of your children?

Question to an expert

I want to lend money to my son, do I have to charge him interest?

If a loan of more than 1,500 euros is granted between individuals, even within a family context, it is obligatory to formalize it in writing. The latter can take the form of a loan contract signed by the lender and the borrower, or of a acknowledgment of debtsigned by the borrower alone.

It formalizes the borrower’s willingness and obligation to repay, and sets the details of the loan – duration, rate, repayment terms. They are freely defined between the two parties. It is therefore perfectly possible to grant a loan free of charge, without interest.

But the characteristics of the loan must show that the intention was to grant a loan, not a donation. For example, the duration must be realistic and allow repayment before the death of the lender.

If the repayment terms deviate too much from those of a traditional loan, the loan risks being reclassified as a disguised family donation. Gift tax may be due.

The borrower must mention loans greater than 5,000 euros in his annual income tax declaration (form no. 2062, “loan contract declaration”). In addition, registration of the loan contract – to be carried out with the registration department of the tax administration of the place of residence – is highly recommended. It makes it possible to prove the date and existence of the contract in the event of dispute, particularly upon the death of the lender. Cost: 125 euros.