Salaam,
If you are a director of a limited company and you loan your company money to get it up and running, are you allowed to charge interest on the money you have loaned to your own company?
Jzk
Salaam,
If you are a director of a limited company and you loan your company money to get it up and running, are you allowed to charge interest on the money you have loaned to your own company?
Jzk
Wa alaykum salaam,
In reality, since you are the director and its your own money simply moving from one account to another, there can be no interest or Riba in such a scenario.
Allah knows best
Mufti saab - I think there is a wider point here which would be interesting to get your thoughts on.
People often use directors “loans” to synthetically extract money from their companies in a tax-efficient manner.
The question is, if that interest is not really interest but just a mechanism by which to legally reduce the tax-burden, should that be permissible?
My view is that the sharia looks at the reality of the construct, rather than the terminology or papering.
With that in mind, I would think it is okay to use such tax-planning techniques.
Thoughts?
Ibrahim - Thank you. Sometimes I forget and struggle to get all my points across clearly .
Mufti Saab - Thank you for your answers!
Jazakallah khayran Ibrahim.
Yes, I agree with you. As long as it is legal, then using such a mechanism is permissible.