How can you lend money to a child without running into problems with the tax authorities?

Your child needs help buying their first home. You can and want to help them. You transfer €20,000 to them, and you even share a bank account for convenience, but a few months later, you receive a notification from the tax authorities for alleged concealed donation or misuse of shared accounts. How can this be?

The truth is that the tax authorities have increased their control over transfers between family members and the use of joint accounts, especially between parents and children. Nowadays, lending money without declaring it or sharing accounts can result in fines of up to 150% of the amount investigated.

In this post, we explain how to help your child financially without getting into trouble with the tax authorities.

What is the tax authorities monitoring between parents and children?

From 2025 onwards, the tax authorities have increased their monitoring of:

- Undeclared transfers between family members.

- Bank accounts shared between parents and children, when it is clear that the money belongs to only one of the two.

- Income into children's accounts that cannot be justified on the basis of their economic activity.

These transactions may be classified as concealed donations and result in significant financial penalties if they are not properly justified.

The Tax Agency reminds us that using joint accounts between generations is only valid if both taxpayers actively use the money and can justify its origin.

Can I lend money to a family member without declaring it?

Yes, but it is not recommended at present. If you lend money to your child without documentation or declaration, the tax authorities may consider it a gift. And now more than ever, they are imposing fines for this.

To avoid risks:

- Prepare a private loan agreement.

- Declare it using Form 600, even if it is tax-exempt.

- Use transfers with a clear description: ‘Loan between individuals’.

How to make a loan between family members step by step

Follow these steps to help your child financially without the tax authorities misinterpreting it.

1. Prepare a private contract

It must include:

- Names, ID numbers and addresses

- Amount borrowed

- Repayment terms

- Date and place

- Signatures of both parties

2. Declare the loan (Form 600)

This legally protects both parties and prevents the tax authorities from interpreting it as a donation.

3. Make the bank transfer

Use a clear description such as ‘Interest-free personal loan’.

How to declare a loan from parents to children to the tax authorities?

Although no tax is payable if there is no interest, it is mandatory to declare it to avoid fines. The steps are as follows:

1. Go to the tax website of your Autonomous Community.

2. Fill in Form 600 as a ‘loan between individuals’.

3. Attach a copy of the signed contract.

4. Mark tax exemption (if applicable).

5. Submit the form and keep the receipt.

What happens if I make a loan to a child and it is not repaid?

If your child does not comply with the agreement, you can:

- Make an amicable claim.

- Make a legal claim with a solicitor.

Article 1091 of the Civil Code requires contracts to be fulfilled, even between family members.

How much can a parent legally lend to their child?

There is no set limit, but there are indirect limits:

- Large amounts must be justified for tax purposes.

- If the child cannot justify how they received the money, they may be fined.

- It is always best to do so with a contract, Form 600 and a justified transfer.

Frequently asked questions about family loans and tax control

Can the tax authorities fine me for lending money to my child?

Yes, if you do not document or declare the loan. It may be considered a donation and result in penalties.

Can I have a joint account with my child?

Yes, but if only you deposit money and your child spends it, it may be considered a hidden donation. It is more advisable to keep separate accounts and justify each transaction.

What are the consequences of not declaring a loan?

Fines, regularisation with interest and a possible check on other financial transactions.

What if the loan is interest-free?

You can still declare the loan as exempt. The important thing is that there is a legal record.

How long do I have to declare the loan?

You have 30 working days from the signing of the contract to submit Form 600.

Conclusions

Helping a child or family member financially is a generous gesture, but when money is involved, so is the tax office, so it must be done knowledgeably and legally. If you need us to draw up the loan agreement, please contact us.