Standard market interest rates are an important aspect when setting financing conditions between affiliated companies
Benefits of loans from a GmbH to a shareholder
A shareholder can have various financial advantages if he receives a loan from a GmbH. Here are a few of them:
- Diversification: A loan from the GmbH enables the shareholder to diversify his assets. Instead of keeping all the capital tied up in the GmbH, he can grant part of the capital as a loan and thus diversify his portfolio more broadly.
- Liquidity: Shareholder loans offer shareholders the opportunity to have additional liquidity. He can use the borrowed capital to make personal investments, finance other business projects, or simply hold it as a financial reserve.
- Tax benefits: There may be tax advantages under certain circumstances. Interest payments on the loan can be claimed as operating expenses of the GmbH, while the shareholder must state the interest income in his personal tax return. This can lead to optimized tax planning.
- Flexibility: Compared to other forms of shareholder participation, a loan offers the shareholder a certain amount of flexibility. He can cancel or extend the loan if necessary and has greater control over the repayment modalities.
The GmbH can also benefit from various financial advantages if it grants loans to its shareholders:
- Interest income: The GmbH receives interest income on the loan granted, which results in additional income for the company. These interest income can help to increase the GmbH's profit and improve its financial situation.
- Liquidity benefits: By granting loans to shareholders, the GmbH can recover its liquid assets back into the company if necessary. This can help improve the GmbH's liquidity and support its financial stability.
- Repayment control: Compared to other forms of raising capital, the GmbH has greater control over the repayment modalities for loans to shareholders. It can set the terms and conditions of the loan agreement and plan repayment according to its needs and options.
Booking of shareholder loans
Loans to shareholders of a GmbH are generally booked in two steps, the payment of the loan and the recording of interest payments.
These processes should be properly documented and appropriate supporting documents should be kept available. In Germany, limited liability companies often use the Standard chart of accounts 03 (SKR03), as it also contains specific accounts for recording and documenting transactions related to shareholder loans. For example, accounts such as “Loans to Shareholders” can be used to post the disbursed loan amount and “Loan Interest” can be used to record interest paid. A uniform accounting framework such as SKR03 enables uniform and comparable accounting, both within the company and in exchange with other companies and business partners.
It is important to note, however, that SKR03 contains specific accounts for various business transactions but does not directly address the legal or tax aspects of shareholder loans.
Legally secure arrangement of loans to shareholders
In order to make shareholder loans legally secure, limited liability companies and shareholders must consider a number of important aspects:
- Clear agreements: It is important that the terms of the loan agreement are set out clearly and unequivocally. This includes interest rate, repayment modalities, term and any collateral.
- Appropriate interest rate: The shareholder loan should pay interest at normal market conditions. It must not be granted at a disproportionately low interest rate.
- Written contract: Make sure that the loan agreement is concluded in writing and signed by both parties. This makes the terms and agreements legally binding.
- Foreign settlement principle: It is important that the shareholder loan is based on the foreign settlement principle. This means that the agreements between the shareholders should be structured in the same way as they would have been agreed with a foreign third party. This prevents tax issues and legal concerns.
- Repayment documentation: All payments in connection with the shareholder loan should be carefully documented. This includes both repayments and interest payments in order to have clear proof of the repayments.
Standard market interest rate for shareholder loans
There are a few approaches that can help you determine an appropriate interest rate:
External references: Take a look at the current interest rates offered by banks or other financial institutions for comparable loans or loans. For example, you can research interest rates on corporate loans or short-term business loans. This information can give you an idea of normal market interest rates.
Industry comparison: Investigate the specific industry in which the GmbH is located. Some industries typically have higher interest rates than others due to risk factors or different market conditions. Find out the current interest rates in your sector and take them into account when setting a normal market interest rate and corresponding credit spreads. SmartZebra supports this with high-quality capital market data.
Reports or expert opinions: It may be helpful to contact a business valuer, auditor, or financial expert who has experience evaluating interest rates on shareholder loans. They can help you determine an appropriate interest rate based on their experience and expertise.
Tax aspects: Please note that the interest rate on shareholder loans can also have tax effects. In some countries, there are tax regulations that are intended to prevent shareholder loans from being granted at a disproportionately low interest rate in order to obtain tax benefits. For example, the tax office can accept a hidden profit distribution (VGA) if the agreed interest rate is lower than the normal market interest rate, meaning that the interest rate set as low is regarded as a profit reduction and therefore as a taxable distribution.
Conclusion
All these aspects show how important it is to agree on shareholder loans within a clear legal framework and to set normal market interest rates in order to minimize potential risks.