Loans Between Companies and Individuals – What Is Allowed and What Is Not?

Loans are a common occurrence in the business world – whether an individual wants to temporarily support a company financially, a company grants a loan to an employee, or one company lends money to another.

However, it is important to understand that loans are not just a matter of mutual agreement, but are strictly regulated by legal and tax rules.

Below is an overview of the key rules you should know before any money transfer takes place.

INDIVIDUAL LENDING TO A COMPANY

An individual can grant a loan to a company, but under certain conditions:

• A loan agreement must exist – with a clearly defined repayment period and amount
• The payment must be made exclusively to the company’s bank account – cash is not allowed

If the source of funds is not clearly shown, the loan may be considered suspicious and trigger additional tax inspection.

COMPANY LENDING TO ANOTHER COMPANY

Companies are allowed to lend money to each other, provided the following conditions are met:

• All tax obligations have been settled
• The lending company has sufficient available funds
• The company is not under a payment block
• A formal loan agreement exists

If the companies are related parties, interest must be charged, for international loans, the transaction must be reported to the Central Bank of Montenegro

COMPANY LENDING TO AN EMPLOYEE

This is a particularly sensitive category, often subject to tax scrutiny. The legal framework stipulates:

• Withholding tax of 15% applies to the gross amount of the loan
• Loans up to 5,000€ per year to unrelated employees are exempt from this tax
• A loan must not be used as a substitute for salary, bonuses, or company profit

All taxable loans must be reported by the end of February for the previous year

While loans are a legitimate tool for business liquidity and stability, proper execution is essential. Every party involved must be aware of legal restrictions to avoid penalties and further inspection.

Before issuing or accepting any loan, professional consultation is strongly recommended — a single misstep could be costly for the company.

For additional questions and individual consultations, we are at your service.