Lending to or borrowing from your own company

Terms used

• Cuenta corriente con socios — The cuenta corriente con socios is the running balance in the company's books of money owed between the company and its owner.
• Modelo 232 — Modelo 232 is the yearly return a company files with Hacienda on dealings with related parties and tax havens.
• Hacienda — Hacienda is the Spanish tax authority.
• Contrato de préstamo — A contrato de préstamo is a written loan contract.

Key rules

• Written contract: Sign the loan contract before the money moves, and give it an official date.
• Market interest: Charge interest at a market rate, or Hacienda can add it for you.
• Company approval: Loans from the SL to an administrator need the general meeting's approval above 10% of company assets.
• Interest withholding: The company withholds 19% on interest it pays you as an individual.

The bottom line

Every loan or withdrawal between you and your SL must be documented, priced at market value and carry proper interest. If it is not, Hacienda can recharacterise it as hidden pay or a dividend, and you pay tax and penalties on it.

What Hacienda does with undocumented cash

If you take money out of the company with no contract or justification, Hacienda usually treats it in one of three ways:

• A hidden dividend, taxed as savings income at 19% to 28%.
• Pay in kind or salary, if you work for the company.
• An undeclared loan, with interest added by Hacienda.

Amounts with no paperwork are not deductible for the company. The VAT on them cannot be recovered. Inspectors start from the balance of your cuenta corriente con socios, the owner's current account in the company's books. Penalties on the unpaid tax usually apply, and for serious infringements they run from 50% to 150% of the unpaid amount, plus late-payment interest. Tax-crime exposure starts only above 120,000 euro of tax due in a year.

Charge market interest

Deals between you and your company must be valued at market value. A loan between an SL and its owner is expected to carry interest at a market rate. If it is interest-free, Hacienda can add an interest rate itself. That raises the company's taxable profit and creates a tax cost for you, as capital income or a disguised benefit. Use the legal interest rate, or Euribor plus a spread, as your reference. Check the reference rate for the year with Hacienda or your adviser.

Sign a written contract first

Sign a contrato de préstamo before any money moves. It should name the parties, the amount and the date. It should also set the interest rate, a repayment schedule or end date, how interest is paid, and any guarantees. Hacienda has no fixed form. The template below gives you a starting point.

The date is what inspectors look at hardest. Give the contract an official date, either through a notary or by filing it for Transfer Tax. The loan is exempt from that tax, but filing it still gives the contract a date.

What the company must do in its books

The company records the loan as a debt to partners and books the interest. When it pays interest to you as an individual, it withholds 19% and reports it. You declare that interest as savings income in your own income tax return.

When the company lends to you

If you are an administrator, the company cannot lend to you without the general meeting's approval when the loan is above 10% of company assets. Treat it as a conflict of interest: disclose it and abstain from the vote on your own loan. If you skip this, you can be personally liable and the loan can be challenged. The same 10% threshold applies to loans to partners and their relatives.

Reporting related-party deals

The company reports its dealings with you on Modelo 232 if it passes these thresholds in a year:

• 250,000 euro in total with the same related party.
• 100,000 euro for specific transactions valued under special rules.
• 50,000 euro for operations with a tax-haven jurisdiction.

For a calendar-year company, file between 1 and 30 November. For other year-ends the deadline shifts to the month after the tenth month following the year-end. Some exemptions exist, so ask your adviser whether they apply to you.

The timeline, documents, checklist and warnings below cover the steps in order.

Timeline and deadlines

• Sign the written loan contract and give it an official date: before the money moves

• File Modelo 232 if the company's year-end is not 31 December: in the month after the 10th month following the year-end

Documents you need

• A written loan contract between you and the SL, signed before the money moves. It names the parties, the amount and the signing date, and sets a market-level interest rate, the repayment schedule or end date, how interest is paid and any guarantees.

• Proof of an official date for the contract: either a notarial document, or the contract filed for Transfer Tax with Modelo 600 (loans are exempt from the tax itself).

• The company's accounting entries showing the loan as a debt to partners, with the interest booked.

• The withholding return for interest paid to an individual (Modelo 123, with the yearly summary on Modelo 193), showing 19% withheld.

• Modelo 232, the yearly return on related-party deals, if your dealings with the company pass the reporting thresholds.

Checklist

• Get the general meeting's approval before the SL lends you money as administrator.

• Sign a written loan contract before any money moves, naming the parties, the amount and the date.

• Set a market-level interest rate and a repayment schedule or end date in the contract.

• Give the contract an official date through a notary, or by filing it for Transfer Tax with Modelo 600.

• Ask the company to show the loan as a debt to partners in its books and to book the interest.

• Withhold 19% on interest the company pays you as an individual and file it with Modelo 123 and Modelo 193.

• Cover every cash withdrawal from the company with a contract or a written justification.

• Add up the year's dealings with the company and check whether Modelo 232 is due.

What to watch out for

• Cash taken out without a contract gets recharacterised: If you take cash out of your SL with no contract or justification, Hacienda can treat it as a hidden dividend taxed as savings income. If you work for the company, it can treat it as pay in kind, or as an undeclared loan with interest added. Put every withdrawal under a signed loan contract or a properly approved dividend or salary payment.

• Unsupported amounts are not deductible: Amounts without documents are not deductible expenses for Corporate Tax, and the VAT on them cannot be recovered. Inspectors look closely at the balance of your current account with the company. Keep the paperwork behind every movement and have your accountant check the current account balance regularly.

• Penalties on the unpaid tax can be heavy: Serious infringements carry penalties of 50% to 150% of the unpaid amount, plus late-payment interest. The company can also be asked for withholdings on the distribution. Above 120,000 euro of tax due in a year, it can become a tax crime. Fix undocumented withdrawals now with a dated contract or a proper distribution, and speak to a tax adviser before Hacienda writes to you.

Template for an owner loan agreement with your company

Sign this before any money moves, and fill in a market-level interest rate. A loan with no interest, or one with no written terms, can be treated as hidden pay or a disguised benefit, and Hacienda can add interest to it.

The agreement

LOAN AGREEMENT (contrato de préstamo)

Signed in [city] on [date].

Parties

• Lender: [full name], [NIE or DNI number], [address]. The lender is the owner of the company.
• Borrower: [company name], [NIF], [registered address], represented by [name and role of the signer].

1. Amount. The lender lends the borrower [amount] euros. The lender will transfer it to the borrower's bank account [IBAN] on [date]. Payment is by bank transfer only.

2. Purpose. The borrower will use the loan for [e.g. working capital, equipment].

3. Interest. The loan carries annual interest of [rate]%, calculated on the outstanding balance. The parties agree this rate matches what an independent lender would charge in similar conditions. The borrower will pay the interest [monthly / quarterly / yearly / with each repayment]. From each interest payment, the borrower will withhold the tax required by law and pay it to the tax office.

4. Repayment. The borrower will repay the loan [in one payment on [date] / in [number] instalments of [amount] euros on [day] of each [month / quarter]]. The borrower may repay early without penalty by telling the lender [number] days ahead.

5. Late payment. If the borrower misses a payment, [state what happens, e.g. the full balance falls due after [number] days' written notice].

6. Guarantees. [None / describe any guarantee].

7. Records. Both parties will keep this agreement, the transfer receipts and the repayment receipts. The borrower will record the loan in its accounts as a debt to its partner.

8. Disputes. The courts of [city] will decide any dispute about this agreement.

Signed in two copies:

Lender: ____________________ Borrower, represented by: ____________________

How to use it

• Pick the rate with care. A company and its owner are treated as related parties, so the loan should be priced at market value. The legal interest rate, or Euribor plus a margin, are common starting points. Check the reference rate for the current year with Hacienda or your adviser, then write the figure in clause 3.
• Give the date proof. A private contract is only as good as its date. Two ways to fix it are to sign before a notary, or to file it with the tax office using the transfer-tax form (Modelo 600). Loans are exempt from that tax, but filing gives the document an official date.
• Match the books. The company records the loan as a debt to partners and books the interest as an expense. The amounts and dates in the books must match this agreement and your bank transfers.
• Move the money by bank. Never lend or repay in cash, and keep each transfer's reference clear, such as "loan, per agreement of [date]".

Have a lawyer or tax adviser check the final wording before you sign. Withholding rates can change by law.

Frequently asked questions

Does the general meeting have to approve a loan from my SL to me?

Yes, a loan from your SL to you as administrator needs the general meeting's approval in advance. It is a conflict of interest, so you must disclose it and abstain from the vote. Skipping this can make you personally liable and open the loan to challenge.

Do I have to report loans with my company on Modelo 232?

Yes, if the company's dealings with you in the year add up to more than 250,000 euro in market value. Modelo 232 is the yearly return on related-party deals, and you and your company count as related parties.

Can Hacienda tax an interest-free loan between me and my SL?

Yes, Hacienda can add a market interest rate to an interest-free loan. That changes the company's taxable income and creates a tax effect for you, as capital income or a disguised benefit.