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Do private loans between individuals pay taxes?

⌐ Lending & investing ¬8 min read

Quick answer

Lending between individuals is legal — but not invisible to the tax authority. The interest you charge is accruable income (LISR —Income Tax Law— arts. 133–134, real interest); if the payer is a legal entity (persona moral), it withholds 20% of the nominal interest from you (LISR art. 135). And whoever receives the loan must report it in their annual return when —together with gifts and prizes— it exceeds $600,000 (LISR art. 90, 2nd paragraph); failing to do so triggers tax discrepancy (discrepancia fiscal) (art. 91).

Both sides of the table pay (or report)

The loan itself is not income: the principal you lend is not deductible and the principal you receive is not accruable. The tax side lives on two edges: the interest (the lender's side) and the reporting (the debtor's side). Ignoring either one is expensive.

Lender: accruable interest

For an individual (persona física), interest charged on loans is income under the interest chapter (LISR art. 133); you accrue the real interest — the portion that exceeds inflation for the period (art. 134) — in the annual return. Practical points:

  • If a legal entity pays you (you lent to a company, the typical partner loan): the company must withhold 20% on the nominal interest from you and remit it as a provisional payment on your behalf (art. 135). That withholding is credited in your annual return.
  • If another individual pays you: there is no automatic withholding — the obligation to accrue is yours and no one else's. "No one withheld from me" does not mean "I don't owe."
  • The contract with a certain date (fecha cierta) and payments by transfer are your evidence that the deposits you receive are agreed interest and recovery of principal — not omitted income.

Debtor: the $600,000 reporting requirement

Individuals must report in the annual return the loans, gifts and prizes obtained during the year when, individually or in the aggregate, they exceed $600,000 (LISR art. 90, second paragraph). It is a reporting obligation, not a payment one — a reported loan does not trigger ISR. The risk is in omitting it:

Art. 91 LISR (tax discrepancy) lets the SAT compare your deposits and spending against your reported income. Loans and gifts not reported under art. 90 are treated as omitted income — that is, the money you were lent is taxed as if it were your own gain, with inflation adjustment, surcharges and a penalty. A real, documented, unreported loan can become the most expensive tax assessment of your life.

The tax survival kit for a private loan

  1. Loan-for-consumption contract (mutuo) with a certain date (notarial ratification or registration) — proves the origin of the deposit.
  2. Disbursement and payments by transfer, never any significant untraceable cash.
  3. Amortization schedule that separates principal (non-accruable / non-deductible) from interest (accruable).
  4. Debtor: check the loans box in the annual return if you exceed $600,000 in the aggregate.
  5. Habitual lender: on top of that, anti-money-laundering obligations — we cover them in the article on the LFPIORPI.

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Frequently asked questions
Does the money that was lent to me pay ISR (income tax)?
No, as long as it is a real loan and —if together with gifts and prizes it exceeds $600,000 in the year— you report it in your annual return (art. 90 LISR). The risk appears when you fail to report it: through tax discrepancy (art. 91) the SAT may treat it as omitted income.
I lent money to a company and it pays me interest — who remits the tax?
The company must withhold 20% on the nominal interest (art. 135 LISR) and give you a certificate; you accrue the real interest in your annual return and credit the withholding. If they did not withhold, the omission is the company's — but your obligation to accrue remains.
And what about IVA (VAT)? Does interest between individuals trigger it?
The general rule of the LIVA is that it does: financing is a taxed service (arts. 1-II and 14-VI) and the exemptions in art. 15-X are specifically listed cases. Non-taxation between individuals is a widespread practice but technically weak; we break down the scenarios and exemptions in the article on IVA on interest.
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