Personal loan & Tax
Are you entitled to take out a personal loan to pay your taxes? Do you have to declare your consumer credit to the tax authorities? Does a personal loan entitle you to tax reductions, whether the lender is a bank or an individual? Do the same conditions apply for a credit or lease?
Loan for paying taxes
There is no official law in Switzerland that formally prohibits paying taxes using a loan.
However, the internal rules applied at some banks prohibit them from granting a loan for this purpose. Consequently, this can be grounds for refusal in the event that you stipulate that the purpose of the loan is to « pay my taxes ». However, as you are not required to state the purpose of the money in your loan application, the banks cannot know how it will be spent.
Declaration not mandatory, but…
No, you are not obliged to declare your loan with the tax authorities, but it is strongly recommended if you are considering purchasing a high value object (example: luxury car, boat, etc.). In the event of resale, you must justify the origin of these additional revenues to the tax authorities.
Loan = Deductible interest
Lender: a Bank
At the end of each year, the bank that granted you the loan is required to send you a tax statement showing the interest that you have paid during the past year. The interest amount can therefore be directly deducted from your taxable income, thus resulting in lower taxes!
Lender: an Individual
In the event that an individual lent you the money, you are also entitled to deduct your interest provided that you supply supporting documents dated and signed by both parties.
Lease = Interest not deductible
If you have opted for a lease rather than a car loan, the interest is not tax-deductible.
- Categories: Consumer credit