Loan to owner/director of company – tax implications ?
This best answered by giving a simple example as below
A company makes a loan of €1,000 to an individual who is a participator in the
company.
The company is treated as paying an annual payment of €1,250 to the individual and is
obliged to pay income tax of €250 to Revenue in accordance with section
[€1,000 / (1 – 0.2) = €1,250 regrossed amount].
If the owner is also a director, then BIK will arise on the notional benefit of the loan which is worked out at 13.5% of the loan amount. The tax on same is returned in the payroll to revenue.
If the company pays back the loan then the tax deducted can be repaid if submitted to revenue fours years after the loan repayment.
Any queries on same give me a call on 091 763817 or email me at oliver@taxreturnhelp.ie