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Rakhi Vasavada
Rakhi Vasavada, Financial Advisor
Category: Finance
Satisfied Customers: 4550
Experience:  Attorney and Financial Expert. Have specialization in Financial Laws.Practice experience of over 13 years
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I have a client who is a shareholder and wants to make a loan

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I have a client who is a shareholder and wants to make a loan to this company. Does he have to charge interest or can he simply lend this interest free?
Dear Friend, Hello and welcome. Thank you for providing an opportunity to assist you. YES.. The director / shareholder of a company can lend a company "interest free" money. Though it should be very properly noted in the loan agreement / other documents that are done. This is required when you do your annual taxes. So, if proper documentation describing interest free nature of the loan are done, YES, a shareholder can loan money to the company -- interest free. There is no law that makes it mandatory to charge interest. IF, however, charging interest for money lent to a company ~ this can be done, but there are tax complications to do with deducting tax at source. Best avoided unless necessary. Any interest is normally tax neutral in terms of being an allowable expense for the company and chargeable to tax for the lender. I am sure this would help. I wish you good luck.You may please leave a positive rating if this helps as this is the only way we are compensated for assisting you. Alternatively, you may revert back with a reply if you need further assistance or if I have missed out on any aspect of your question. Warm Regards
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