Family loan

Parents can lend money to their children interest-free without tax consequences.

Normally, the child would be taxed on the deemed interest benefit if the loan is interest-free. However, if the loan is granted on so-called demand terms, the Danish Tax Agency (Skattestyrelsen) will accept that the loan is interest-free. A demand loan means that the lender can require full repayment of the debt at short notice.

If parents give their children a gift or advance inheritance, the child must pay tax on the portion exceeding the tax-free gift allowance. If parents instead lend money to their children, no tax is payable on any part of the amount. The parents can later reduce the child’s debt by giving tax-free gifts each year. However, this must not be agreed in advance. If it is planned from the outset that the loan will be reduced through annual tax-free gifts, the tax authorities will consider the loan a gift, and the child will be taxed accordingly.

At KROMANN Law Firm, we can help you navigate the complex tax rules so you can support your children as much as possible without running into legal issues.

If you are considering lending money to family members other than your children, we recommend creating a promissory note. You can read more about this on the page below.

CONTACT US TODAY

Contact us today by phone on +45 8618 1102 or by email at kontakt@advokatkromann.dk and receive competent and valuable legal advice regarding your family loan.

You can read more about related topics on the pages below.