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How to Declare Taxes from P2P Lending

<article>
<h2>Peer to Peer Lending and Taxes</h2>
<p>If you are wondering whether you have to pay taxes on your earnings from P2P lending, the answer is <strong>yes</strong>.</p>
<p>This guide will introduce a framework that will answer the most common questions regarding paying taxes from your P2P lending income.</p>
<center>
<div class="video"><iframe src="https://www.youtube.com/embed/XvrPQW-HKwo" frameborder="0"></iframe></div>
</center>
<div class="checklist-box">
<h3>What we are covering:</h3>
<ul>
<li>Where do I need to pay taxes?</li>
<li>What do I need to submit my tax declaration?</li>
<li>How do I calculate my taxable income?</li>
<li>Do I need to pay taxes even if I reinvest my earnings?</li>
<li>Can I deduct my losses from P2P lending?</li>
<li>Are P2P lending platforms withholding taxes?</li>
<li>How much tax do I need to pay?</li>
<li>How to optimize my tax?</li>
</ul>
</div>
<div class="alert-box">
<h3>No Tax Advice</h3>
<p>Any information in this tax guide shall not be understood as tax advice. The tax legislation in various jurisdictions is changing, so you should consult a tax advisor to resolve some tax-specific questions.</p>
</div>
<h2>Where do I need to pay taxes?</h2>
<p>In most cases, you must pay taxes in the country where you are a tax resident.</p>
<p>If you are therefore investing on P2P marketplaces like <a href="https://p2pempire.com/en/review/peerberry">PeerBerry</a> or <a href="https://p2pempire.com/en/review/income">Income</a>, you don&rsquo;t pay tax in the countries where you invest.</p>
<p><mark>We will mention a few exceptions later in this article about taxes on P2P earnings. </mark></p>
<h2>What do I need to submit my tax declaration?</h2>
<p>To submit your tax declaration, you will need the following:</p>
<div class="tips-box">
<ol>
<li>Tax Statement / Account Statement from your P2P lending platform</li>
<li>Sum of your earnings from <a href="https://p2pempire.com/en/p2p-lending">P2P lending</a></li>
<li>The correct tax declaration form</li>
</ol>
</div>
<p>While it can be intimidating for some investors to calculate taxable income, it isn&rsquo;t too much of a hassle.</p>
<p>Most P2P lending platforms allow you to download a tax or account statement, where you will find the earnings from this specific platform during the chosen period.</p>
<p>If you are investing on multiple platforms, you calculate the sum of your earnings.</p>
<p>Remember that, depending on your country of tax residence, you must add the sum of your earnings from P2P lending platforms into a dedicated field which is likely labeled as &ldquo;foreign capital income&rdquo; or &ldquo;income from other sources&rdquo;.</p>
<p><mark>If you are unsure, research this information on the website of your tax authorities or consult an accountant or tax advisor. </mark></p>
<h2>How do I calculate my taxable income?</h2>
<p>Most of the P2P lending platforms that offer a tax statement will calculate the income for you. You navigate to the &ldquo;Account Statement&rdquo; section in your dashboard, select the period for which you want to review your income, and download the report.</p>
<img class="lazy" src="https://p2pgallery.s3.eu-central-1.amazonaws.com/tax-statement.webp" border="0" alt="tax report" width="auto" height="auto" loading="lazy" data-src="https://p2pgallery.s3.eu-central-1.amazonaws.com/tax-statement.webp" />
<p>Some platforms don&rsquo;t provide a &ldquo;tax report,&rdquo; but you can download the &ldquo;account statement,&rdquo; which lists all the various transactions on your account.</p>
<img class="lazy" src="https://p2pgallery.s3.eu-central-1.amazonaws.com/account-statement.webp" border="0" alt="tax report" width="auto" height="auto" loading="lazy" data-src="https://p2pgallery.s3.eu-central-1.amazonaws.com/account-statement.webp" />
<p>It&rsquo;s important to understand that not all &ldquo;incoming&rdquo; transactions are taxable income.</p>
<p>Here are the most common transactions which count as &ldquo;earnings&rdquo; from P2P lending:</p>
<div class="checklist-box">
<ul>
<li>All interest payments</li>
<li>Late fees</li>
<li>Earnings from secondary market transactions</li>
<li>Bonuses</li>
</ul>
</div>
<p>Any principal repayments or deposits are <strong>not taxable income</strong>.</p>
<h2>Do I need to pay taxes even if I reinvest my earnings?</h2>
<p>The short answer is <strong>YES</strong>.</p>
<p>Whether you keep the money on the platform or not, you have to pay taxes on your earnings for the last year.</p>
<p>Some product descriptions like Bondora&rsquo;s Go &amp; Grow promote the idea that you don&rsquo;t need to tax your income unless you withdraw it. This depends on the tax regulation in your country and not what Bondora claims.</p>
<p>Certain investors in Germany also promote the &ldquo;alternative&rdquo; taxation, which supports Bondora&rsquo;s claims to tax only income that has been withdrawn.</p>
<p>The argument is that a platform can default in the future, and you might pay taxes on earnings that you have lost due to the incapability of the defaulted platform to repay your money.</p>
<p><mark>This is something that you should consult with your tax advisor. In most countries, you have to pay taxes every year, regardless of whether you reinvest your income or not. </mark></p>
<h2>Can I deduct my losses from P2P lending?</h2>
<p>The short answer is <strong>NO</strong> in most countries.</p>
<p>Some countries are, however, more flexible than others. If you can prove that the defaulted loan can no longer be recovered, you might be able to defend your deduction of losses in front of your tax authorities.</p>
<p><mark>You can prove your losses with an official document either from the platform or from the court in the case that the platform has defaulted. </mark></p>
<h2>Are P2P lending platforms withholding taxes?</h2>
<p>70% of P2P lending platforms don&rsquo;t withhold taxes, which makes your tax declaration hassle-free. Some platforms do, however, withhold taxes on your investments.</p>
<p>Here are some of the P2P lending platforms that deduct taxes for you:</p>
<div class="checklist-box">
<ul>
<li>15% on Heavy Finance</li>
<li>15% on NEO Finance</li>
<li>15% on Crowdpear&nbsp;</li>
<li>15% on Profitus</li>
<li>15% on InRento</li>
<li>5% on VIAINVEST for EU/EEA residents (20% for non-EU/EEA residents and Latvian tax residents)</li>
<li>5% on Mintos for EU/EEA residents (20% for non-EU/EEA residents and Latvian tax residents)</li>
<li>5% on TWINO for EU/EEA residents (20% for non-EU/EEA residents and Latvian tax residents)</li>
<li>5% on Debitum for EU/EEA residents (20% for non-EU/EEA residents and Latvian tax residents)</li>
<li>0% on other non-regulated platforms (PeerBerry, Esketit, Robocash, Income,..)</li>
</ul>
</div>
<p>How much tax is being withheld from your earnings depends on where the platform is regulated. Non-regulated platforms do not withhold any taxes for investors.</p>
<div class="tips-box">
<h3>Quick Guide</h3>
<ol>
<li>If you invest on a regulated Latvian platform, you will pay a 5% income tax in Latvia as an EU/EEA tax resident.</li>
<li>If you invest on a regulated Lithuanian platform, you will pay a 15% income tax in Lithuania as an EU/EEA tax resident.</li>
</ol>
</div>
<h3>Reduction of the withheld tax</h3>
<p>Latvian and Lithuanian-regulated platforms offer you the possibility to reduce the tax rate deducted from your earnings if you submit a signed tax declaration.</p>
<p>For regulated Lithuanian platforms, you can submit the <a href="https://www.paskoluklubas.lt/uploads/marketing/DAS-1_(FR0021)_(EN).pdf" target="_blank" rel="noopener noreferrer">DAS-1</a> form and you will be charged a reduced tax rate, and if your country has a <a href="https://ec.europa.eu/taxation_customs/treaties-avoidance-double-taxation-concluded-member-states_en" target="_blank" rel="noopener noreferrer">double taxation agreement</a>, you can get your tax back.</p>
<p><mark>Please contact the platform directly or consult your tax advisor for more information.</mark></p>
<h3>Avoiding double-taxation</h3>
<p>In most cases, the platform investment automatically withholds your income tax and does not cause double taxation.&nbsp;</p>
<p>The tax deducted from your earnings will be declared in your annual tax declaration.</p>
<h4>Example</h4>
<p>Let's imagine that you are a tax resident in Germany. If you invest on Crowdpear and 15% is deducted from your earnings, you report that paid tax in your annual tax declaration and your other capital gains. If you have passed the tax allowance of &euro;1,000 per person per year, you will pay only the difference you owe (i.e., 25% - 15% = 10%).</p>
<h2>How much tax do I need to pay?</h2>
<p>The actual tax payment depends on your country&rsquo;s legislation and how it categorizes your P2P lending earnings.</p>
<p>Typically, the tax authorities label your income from P2P lending as <strong>Personal Income</strong> or <strong>Capital Gains</strong>.</p>
<p>Here is a graphic that shows the tax rate for <strong>Personal Income</strong> on the European continent.</p>
<img class="lazy" src="https://p2pgallery.s3.eu-central-1.amazonaws.com/personal-income.webp" border="0" alt="tax report" width="auto" height="auto" loading="lazy" data-src="https://p2pgallery.s3.eu-central-1.amazonaws.com/personal-income.webp" />
<p><em>Source: taxfoundation.org</em></p>
<p>Certain countries, such as Germany, label income from P2P loans as <strong>Capital Gains</strong>, which means that you will be paying 26.4% tax in Germany.</p>
<img class="lazy" src="https://p2pgallery.s3.eu-central-1.amazonaws.com/capital-gains.webp" border="0" alt="tax report" width="auto" height="auto" loading="lazy" data-src="https://p2pgallery.s3.eu-central-1.amazonaws.com/capital-gains.webp" />
<p><em>Source: taxfoundation.org</em></p>
<p>It&rsquo;s good practice to educate yourself about how the P2P lending income in your country is taxed, as this influences the net return from P2P lending.</p>
<div class="checklist-box">
<h3>Pay your tax</h3>
<ul>
<li>Remember that you must pay tax on your income, regardless of whether the platform is withholding a portion of the tax. Make sure you file your documents in time to avoid trouble with the tax office.</li>
</ul>
</div>
<h2>How to optimize my tax?</h2>
<p>You can use a few strategies to optimize your tax based on your country's legislation.</p>
<p>Certain countries, including Germany, offer a yearly tax allowance (&euro;1000 per person); in the U.S., you will pay the tax according to your tax brackets.</p>
<p>In the UK, for example, you can benefit from the innovative finance ISA (IFISA) which lets you earn money from P2P lending tax-free (&pound;20,000 tax allowance per year).</p>
<p>There are also certain country-specific tax benefits for private investors who relocate to Portugal (0% taxes) or <strong>invest through a company</strong>.&nbsp;</p>
<p>UAE tax residents are not subject to tax deductions even on regulated P2P lending platforms.&nbsp;</p>
<p>For 99% of retail investors, the tax rate depends on the country where you are a tax resident.</p>
<p>To learn more about P2P lending, navigate to our <a href="https://p2pempire.com/en/academy">P2P Lending Academy</a>.</p>
</article>

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Find out how to pay taxes from Mintos ⏩ EstateGuru ⏩ PeerBerry ⭐ All you need to know about tax reports for P2P lending sites.

How to Declare Taxes from P2P Lending 

Declare your tax from P2P Lending hassle-free

P2P Lending & Taxes

How to Declare Taxes from P2P Lending

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