--- title: Shareholders' loans must be declared quarterly in the future! date: 2018-04-06T13:44:57Z modified: 2024-05-30T11:02:34Z permalink: "https://grow.ee/osanike-laenud-tuleb-edeid-deklareerida-kord-kvartalis/" type: post status: publish excerpt: We have covered several changes that came into effect in 2018 on our blog, but one important innovation has not yet been discussed. Namely, from now on, loans granted to shareholders must be declared quarterly (so already on April 20). wpid: 4947 featured_image: "https://grow.ee/wp-content/uploads/2017/11/Grow-Finance-tule-konsultatsiooniile-scaled.jpg" timestamp: 2024-05-30T11:02:34Z tags: - Accounting --- We have covered several [changes implemented in 2018](/?p=4882) on our blog, but one important innovation has not yet been discussed. Namely, from now on **loans given to shareholders must be declared quarterly** (therefore **already on April 20**). Since several questions have arisen in this regard, we will describe everything related to it in more detail below.## Who were the loans given to and which loans must be declared? On April 20, **shareholder loans given to the parent company of the group or to a horizontal sister company must be declared**. According to the Commercial Code, granting a loan to a shareholder and a member of the management board is prohibited (but permitted to the parent company with which a group is formed, if the interests of creditors are not harmed), but this rule is intended to protect creditors and, as a general rule, the tax authority cannot rely on it. It should be mentioned here that this tax rule does not apply to owner loans where the owner is a private individual or a company not belonging to the group. In terms of taxation, the previous rule applies to other (non-group) owners, that if a loan has been granted, the rules for taxation of transactions involving related parties must be followed. However, **the loan repayment term must be kept in mind**: a term of more than 2 years requires the tax authority to prove the ability and intention to repay the loan. The tax authority must be informed of loans granted since July 1, 2017, as well as of older loans in which the loan amount has been increased, the loan repayment term has been extended, or other important conditions have been changed since July 1, 2017. In analyzing all this, [tax consultation](https://grow.ee/services/maksunoustamine/) participation is helpful.## Shareholders' loans have been declared, what happens next? Then you have to wait until the tax officer contacts you and starts investigating to make sure that this is not a hidden profit allocation. In order to assess the compliance of the loan with the usual conditions, the following must be paid particular attention:- loan repayment term; - the borrower's ability to repay the loan received. **The assessment is based on the following criteria**:- granting a loan for an unreasonably long period of time (over 5 years); - unreasonable repayment schedule; - repeated extension of the repayment term; - repeated increase in the loan amount; - dependence of the loan amount on the amount of profit (e.g. situations where a loan of the same size as the subsidiary's profit is granted to the parent company every year); - the borrower's actions in using the loan amount clearly indicate the impossibility of repayment; - non-payment of dividends or other reason. According to the explanations of the Tax Board, taxation is justified primarily when it is evident from the terms of the loan agreement and the use of the loan that the loan is not intended to be repaid or that it is clearly impossible. **When assessing the probability of repayment**, the borrower's existing and planned business activities, its business plan and other information related to economic activities are analyzed. When assessing the borrower's ability to repay shareholder loans, it is also important to consider the availability of collateral.## What happens if it turns out that the loan is classified as a hidden profit distribution? Hidden profit distribution is taxed at a rate of 20/80 and is declared and paid together with labor taxes by the 10th of the following month. If a loan taxed as a hidden profit distribution is repaid in full or in part, there is **the right to pay tax-free dividends in the amount of the repaid amount**. You can read more about the taxation of hidden profit distribution on the [Tax and Customs Board's website](https://www.emta.ee/ariklient/maksud-ja-tasumine/tulumaks-ja-sotsiaalmaks/dividendide-ja-varjatud-kasumieraldise).## To avoid confusion, use a professional accounting service. The accounting office Grow, dedicated to modern solutions, ensures the correct fulfillment of all requirements of the law. To avoid confusion in your company's operations, [contact us](https://grow.ee/wp-content/uploads/wp-mfa-exports/page/kontakt.md) and together we will find a service package that is right for your company.