Shareholder Loans from a Limited Company – Taxation, Repayment and Reporting

A shareholder loan is a loan granted by a limited company to a shareholder or a member of the shareholder’s family. The loan must be repaid to the company according to the agreed terms.

If the borrower, or a member of their family, directly or indirectly owns at least 10% of the company’s shares or voting rights, the part of the shareholder loan withdrawn during the same calendar year and still unpaid at the end of the year is taxed as the borrower’s capital income. The tax treatment is based on the situation on 31 December.
 

Before withdrawing a shareholder loan

Agree on the loan terms and document the loan before withdrawing the funds:

1. Assess the loan amount and your ability to repay it. The loan must have a genuine intention to be repaid.
2. Prepare the company’s formal decision approving the loan.
3. Draw up a written promissory note that specifies, for example:
   • the loan amount and withdrawal date
   • the repayment schedule and due date
   • any interest
   • any collateral
4. Record the loan in the company’s accounts as a receivable from the shareholder.
5. Keep the company’s and your personal cash flows separate.

Proper documentation and compliance with the agreed terms are particularly important when assessing whether the arrangement is a genuine loan intended to be repaid or potentially a disguised dividend.
 

How is a shareholder loan taxed?

A shareholder loan is taxed as capital income when all of the following conditions are met:

• the loan was withdrawn during the current calendar year
• the borrower or a member of their family owns at least 10% of the company’s shares or voting rights
• part of the loan remains unpaid on 31 December.

The taxable amount is the part of the loan withdrawn during the calendar year that has not been repaid by the end of the year.

The loan is not taxed merely because the company has approved the loan. The funds must actually have been withdrawn. If the loan withdrawn during the same year is repaid in full by 31 December, it is generally not taxed as capital income for that year under Section 53a of the Finnish Income Tax Act.
 

Example

You withdraw EUR 10,000 from your limited company in May 2026 and repay EUR 4,000 in December 2026.

If the 10% ownership or voting-rights threshold is met, EUR 6,000 is taxed as capital income for 2026.
 

Does a shareholder loan have to bear interest?

If the loan is taxed as the borrower’s capital income under Section 53a of the Finnish Income Tax Act, the loan does not necessarily have to bear interest according to the Finnish Tax Administration’s guidance.

If the 10% ownership or voting-rights threshold is not met, or if the loan is withdrawn and repaid during the same tax year, the loan may not qualify as a shareholder loan taxed as capital income. In these situations, interest should generally be charged at least at the rate of the basic interest rate confirmed by the Ministry of Finance. In certain circumstances, failure to charge interest may lead to the arrangement being assessed as a disguised dividend.
 

How to repay a shareholder loan

Repay the loan to the company according to the schedule specified in the promissory note. Keep records of all repayments.

The repayment of a shareholder loan previously taxed as capital income can generally be deducted from capital income as an expense incurred in acquiring income if:

• the loan was previously taxed as capital income, and
• the loan is repaid no later than during the fifth tax year following the year in which the loan was withdrawn.

If you withdraw the loan in 2026, the repayment must take place by the end of 2031 for it to potentially be deductible for tax purposes.

The five-year deadline does not cancel the loan. The debt continues to exist even if repayment is no longer tax-deductible.
 

Can the loan be offset against salary or dividends?

In certain situations, the loan can also be repaid by offsetting it against a salary or dividend receivable. Only the net amount remaining after withholding tax and other statutory deductions can be used for the offset.

The salary or dividend is taxed normally even if it is used to offset the shareholder loan. We recommend confirming the treatment of the offset with your accountant or tax adviser in advance.
 

What if the loan is not intended to be repaid?

A shareholder loan must be a genuine loan that the borrower intends and is able to repay.

If there was no genuine intention to repay the loan, it may in certain circumstances be treated as a disguised dividend. The assessment may take into account, for example:

• the terms of the loan
• the borrower’s ability to repay the loan
• the documentation
• whether the agreed repayments have actually been made.

Taking out a new shareholder loan to repay an old loan does not automatically mean that the old loan has been acceptably repaid for tax purposes. If the arrangement is used only to extend the repayment deadline, the repayment may be challenged in certain circumstances.
 

How is a shareholder loan reported?

The limited company reports a shareholder loan taxable as capital income to the Finnish Tax Administration in an annual information return. UKKO.fi submits this notification on behalf of limited companies using our service. The borrower should check the information on their pre-completed tax return and correct any missing or incorrect information.
 

Frequently asked questions

Are all shareholder loans taxed as capital income?

No. Capital-income taxation requires, among other things, that the borrower or a member of their family owns at least 10% of the company’s shares or voting rights and that part of the loan withdrawn during the calendar year remains unpaid at the end of the year.

Is a loan taxed if it is repaid during the same year?

A loan withdrawn during the same year is generally not taxed as capital income if it is repaid in full by 31 December. The treatment of interest must nevertheless be assessed separately.

Does the loan disappear after five years?

No. The five-year deadline concerns the tax deductibility of repaying a loan previously taxed as capital income. The loan must still be repaid to the company.

Can the company pay the shareholder’s personal expenses?

In certain situations, expenses paid by the company on behalf of the shareholder may be treated as a shareholder loan if they are recorded as a receivable from the shareholder and there is a genuine intention to repay them. We recommend confirming the correct accounting treatment before recording the expenses.

If you need help

If you are planning to take out a shareholder loan, are unsure how it should be recorded, or want to confirm how repayment or an offset should be handled, contact osakeyhtio@ukko.fi.