Changes regarding loans in the Income Tax Act

The new wording of the Income Tax Act comes to force 01.01.2018


The new Income Tax Act will start regulating the declaration of loans in legal entities. 

When the legal entity gives a loan to its subsidiaries or to a parent company for a period longer than 48 months, the lender has to be ready to prove, upon the request of tax authorities, that the borrower is able to pay back the loan and that it has the intention to do so. The tax authorities will give at least 30-days to prove such facts.

If the facts of such transaction reference that it might be a concealed profit distribution instead of a loan between partnering companies the loan will be taxed with income tax.

Companies are obliged to submit a declaration to the Tax and Customs Board for the 20th date of the following month to the quarter when the loan was given.

The obligation to declare the loans comes to effect regarding loans that were given since 1st July 2017. The loans must be declared not later than 10th of February 2018. The obligation also extends to loans where the loan amount has increased, the date of repayment extended or other essential requirements were changed.