In general, taxes arising from transactions on the platform are the responsibility of our platform users to report and pay them.
For lenders, we think there are two optimal ways of tax reporting:
- Income tax on interest is 15%.
- Income tax on NET gains from funding.
The first option will be better if bad credit does not exist or very minimal in your loan portfolio.
Meanwhile, the second would be better to offset losses from bad credit.
Apart from these two options, there are other ways to include this income in your tax returns.
We recommend lenders to consult a tax consultant to make efficient tax reporting.
For borrowers, there is no applicable tax arising from applying for a loan as long as it is recognized as an expense.
However, when borrowers experience defaults, under the applicable tax law they are required to recognize their failed loans as income on their tax returns.
This short guide was written with the help of our tax advisor.