June 2026
Taxable gift or loan? Taxation practice from the Supreme Administrative Court
Loans between family members are very common, but if the circumstances or terms are unusual, they may be considered fully or partially taxable gifts. Ambiguities often arise with these loans, particularly when given by elderly parents to their children.
The Supreme Administrative Court (the SAC) of Finland published on June 26, 2026 a precedent (KHO:2026:54) where this matter was addressed. A’s parents, born in 1953 and in 1954, had given a loan of EUR 270,000 to A on October 4, 2018. A deed of gift was concluded on the loan. According to the repayment schedule, attached to the deed of gift, the loan instalments were due four times a year. No interest was levied on the loan. The first instalment of EUR 1,000 was scheduled to be paid on January 1, 2022, and the final instalment on September 1, 2045. The amount of the instalment increased gradually so that the maximum amount for a single instalment was EUR 4,000. According to the repayment schedule, the loan was supposed to be reduced by a total of EUR 19,750 by January 1, 2026. By January 8, 2026 A had reduced the loan by EUR 20,000 and thus the loan had been repaid on schedule.
The Tax Administration had initially treated the entire loan received by A as a taxable gift, and the Administrative Court agreed with the decision. The Administrative Court had referred to, among other things, a grace period of several years, a substantial loan principal, a repayment structure weighted toward the end of the loan term, and the parties' circumstances as a whole, and stated that the debt relationship involved such exceptional features that the transfer of funds could not credibly be considered a loan between related parties.
The SAC took into account that A's annual gross income during 2018–2020 was EUR 75,000–110,000 and thus he had the financial means to pay back the loan. In addition, a loan agreement with a repayment plan had been concluded and A had repaid the loan in accordance with the plan. Thus, the SAC ruled that A had not received a taxable gift.
The Supreme Administrative Court (the SAC) of Finland published on June 26, 2026 a precedent (KHO:2026:54) where this matter was addressed. A’s parents, born in 1953 and in 1954, had given a loan of EUR 270,000 to A on October 4, 2018. A deed of gift was concluded on the loan. According to the repayment schedule, attached to the deed of gift, the loan instalments were due four times a year. No interest was levied on the loan. The first instalment of EUR 1,000 was scheduled to be paid on January 1, 2022, and the final instalment on September 1, 2045. The amount of the instalment increased gradually so that the maximum amount for a single instalment was EUR 4,000. According to the repayment schedule, the loan was supposed to be reduced by a total of EUR 19,750 by January 1, 2026. By January 8, 2026 A had reduced the loan by EUR 20,000 and thus the loan had been repaid on schedule.
The Tax Administration had initially treated the entire loan received by A as a taxable gift, and the Administrative Court agreed with the decision. The Administrative Court had referred to, among other things, a grace period of several years, a substantial loan principal, a repayment structure weighted toward the end of the loan term, and the parties' circumstances as a whole, and stated that the debt relationship involved such exceptional features that the transfer of funds could not credibly be considered a loan between related parties.
The SAC took into account that A's annual gross income during 2018–2020 was EUR 75,000–110,000 and thus he had the financial means to pay back the loan. In addition, a loan agreement with a repayment plan had been concluded and A had repaid the loan in accordance with the plan. Thus, the SAC ruled that A had not received a taxable gift.
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The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
The information in this site has been prepared for general informational purposes only and it should not be used as a substitute for consultation with a professional tax, legal or other competent advisor. While we have made every attempt to ensure that the information contained in this site has been obtained from reliable sources, Effektiivi Oy is not responsible for any errors or omissions, or for the results obtained from the use of this information.
