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<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>. In this guide, we will introduce a framework that will answer the most common questions when it comes to paying taxes from your P2P lending income.</p>
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<h3>What we are covering:</h3>
<ul>
<li>Where do I need to pay taxes?</li>
<li>What do I need in order 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>
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<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, which is why you should consult a tax advisor to resolve some tax-specific questions.</p>
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<h2>Where do I need to pay taxes?</h2>
<p>In most cases, you are required to pay taxes in the country where you are a tax resident. 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 countries in which you invest.</p>
<p><mark>There are a few exceptions which we will mention later in this article about taxes on P2P earnings. </mark></p>
<h2>What do I need in order to submit my tax declaration?</h2>
<p>In order to submit your tax declaration you will need the following:</p>
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<ol>
<li>Tax Statement / Account Statement from your P2P lending platform</li>
<li>Sum of your earnings from P2P lending</li>
<li>The correct tax declaration form</li>
</ol>
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<p>While it can be intimidating for some investors, to calculate the taxable income, it really isn&rsquo;t too much of a hassle.</p>
<p>Most of the P2P lending platforms offer you the possibility to download a tax statement or account statement, where you will find the earnings from this specific platform during the chosen period of time.</p>
<p>If you are investing on multiple platforms, you simply calculate the sum of your earnings.</p>
<p>Keep in mind that, depending on your country of tax residence, you are required to add the sum of your earnings from P2P lending platforms into a dedicated field which is likely labelled as &ldquo;foreign capital income&rdquo; or &ldquo;income from other sources&rdquo;.</p>
<p><mark>If you are not sure, 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 simply navigate to the &ldquo;Account Statement&rdquo; section in your dashboard, select the time 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" alt="tax report" data-src="https://p2pgallery.s3.eu-central-1.amazonaws.com/tax-statement.webp" />
<p>Some of the 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" alt="tax report" 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>
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<ul>
<li>All interest payments</li>
<li>Late fees</li>
<li>Earnings from secondary market transactions</li>
<li>Bonuses</li>
</ul>
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<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>Regardless of 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 is claiming.</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 absolutely 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>99% 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>
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<ul>
<li>15% on Heavy Finance</li>
<li>15% on NEO Finance</li>
<li>15% from Czech loans on VIAINVEST</li>
<li>19% from Spanish loans on VIAINVEST</li>
</ul>
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<p>If you are able to provide a tax certificate from your country, VIAINVEST won&rsquo;t be charging you any taxes. By submitting the <a href="https://www.paskoluklubas.lt/uploads/marketing/DAS-1_(FR0021)_(EN).pdf" target="_blank" rel="noopener noreferrer">DAS-1</a> form to NEO Finance, 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> in place, you can get your tax back.</p>
<p><mark>For more information on this matter, please reach out to the platform directly or consult your tax advisor. </mark></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 Personal Income on the European continent.</p>
<img class="lazy" src="https://p2pgallery.s3.eu-central-1.amazonaws.com/personal-income.webp" alt="tax report" 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 Capital Gains, 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" alt="tax report" 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 clearly influences the net return from P2P lending.</p>
<h2>How to optimize my tax?</h2>
<p>There are a few strategies that you can use to optimize your tax, based on the legislation of your country.</p>
<p>Certain countries, including Germany, offer a yearly tax allowance (&euro;801 per person) and 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 invest through a company.</p>
<p>For 99% of retail investors, the tax rate is dependent 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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