What do you need to do to lend money to a family member?

Question

José Manuel Alburquerque · Accepted Answer

Legally, it is enough to agree on it and hand over the money, because a loan is valid even if it is made orally. Even so, the prudent course is to pay the money by bank transfer and sign a document stating the amount, how it is to be repaid and whether there is interest. That piece of paper is the best proof that it was a loan and not a gift, should you ever need to claim it back or should the tax authorities ask. In Catalonia, the person receiving the money must file the contract with the “Agència Tributària de Catalunya”, the Catalan tax authority, within one month, even though no tax is payable. The document A loan of money is governed by the Spanish Civil Code (“Código civil”), because the “Código Civil de Cataluña”, the Catalan Civil Code, has no rules of its own for this contract. What is Catalan, though, is the time limit for claiming it back, as explained below. All that is needed is a private document signed by both parties, which should state: Who is lending and who is receiving the money, the amount and the date it is handed over. How the money is handed over. The best way is a bank transfer with a reference such as “loan”, so that there is a record at the bank. When and how it is to be repaid, for example in monthly instalments by bank transfer. It is also advisable to provide for what happens if payments stop. Whether there is interest or whether it is interest-free. Without an express agreement no interest is owed, but it is advisable to state in writing that the loan is interest-free, for the reasons explained below regarding the lender's income tax. If interest is agreed, it must not be disproportionate, because under the law against usury a loan is void if its interest is far higher than the normal rate and disproportionate. It can also be signed before a notary, as a public deed. That involves the notary's fees, but if the family member does not pay it allows you to ask the court directly for their assets to be seized, without first going through court proceedings. If you lend to one of your children and have others, the document also prevents arguments between siblings over the inheritance, because it makes clear what was lent and what has been repaid. The tax authorities A loan between private individuals is exempt from the “impuesto de transmisiones patrimoniales”, the Spanish property transfer tax, but the person receiving the money must file it with the Catalan tax authority, using Form 600, within one month. In addition, two things must be borne in mind: If you charge interest, you must declare it in your income tax return. If you do not, the tax authorities presume that there is interest, calculated at the statutory interest rate (“interés legal del dinero”), unless you prove that the loan is interest-free. That is why the document should say so and repayments should be made through the bank, as agreed. If the money is not repaid, if there is no repayment schedule and nothing is paid or if the debt is eventually forgiven, the tax authorities may treat it as a gift and claim the “impuesto de donaciones”, the Spanish gift tax, from the person who received the money. As there is no public deed of gift, between parents and children that tax works out considerably more expensive than for a gift made before a notary. If it is not repaid In Catalonia, the time limit for claiming repayment of a loan is generally ten years from when it should have been repaid. If it is repaid in instalments, the prudent course is not to let three years go by without claiming each unpaid instalment. Between spouses, the time limit does not run until they separate. Between stable partners (in a “pareja estable”, the Catalan stable partnership), it does not run while they live together. Between parents and adult children, by contrast, it generally runs as it would between any other people. If the family member does not pay, you can bring a claim in court, after first trying to reach an agreement as the law has generally required since 2025. Under the Spanish Civil Code, which applies in most of the rest of Spain, the general time limit for bringing a claim is five years.