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Dutch income tax deduction of interest on family loan to purchase and/or renovate own house in the Netherlands

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Dutch income tax deduction of interest on family loan to purchase and/or renovate own house in the Netherlands

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If you are planning to enter into, or have already entered into, a loan provided by family and/or friends – or in short all parties other than banks – to purchase and/or renovate an own house, you should take into account the following.

If interest is due on such a loan, this interest may be tax deductible in the Netherlands. However you have to be sure that the criteria of the loan qualify under the current legislation which also applies on mortgage loans provided by banks. Meaning there should be e.g. a qualifying redemption schedule. The interest due should be set on businesslike standards, but deviations are possible in case the loan does not contain a first right of mortgage. In case there is no first right of mortgage registered at the Notary, the loan could be seen as a personal loan without collateral on which a higher percentage rate can be calculated. The lender, if resident of the Netherlands, will in principle have to add the amount of the loan to his Dutch personal income tax box 3 equity.

Another condition to be met in order to obtain interest Dutch personal income tax deduction is that the Dutch tax authorities have to be properly informed on the conditions of the family loan.

We can assist with preparing the loan agreement as well as with the notification towards the Dutch tax authorities.

Please feel free to contact Jan-Hein van Leeuwen for any questions you may have on this matter.

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