Close companies

Interest paid to directors and associates

Interest paid by a close company (in excess of a specified rate) to directors or their associates is treated as a distribution. Interest payments to directors or their associates of a company which controls, or is controlled by, the close company, are also covered. The specified rate of interest is 13% per annum.

The director and, or their associates must have a material interest in the close company, or the company that controls the close company. A material interest is beneficial ownership, or control, of more than 5% of the company’s ordinary shares.

The company cannot take a deduction for the distribution when computing its Corporation Tax (CT) liability. The company may need to deduct Dividend Withholding Tax (DWT) from the distribution.

  • Example

    Laura is the sister of a director of a close company. The director controls 30% of the ordinary shares. Laura provides a €100,000 loan to the company and charges 20% annual interest.

    Laura is the associate of a director who has a material interest in the company. The amount of interest paid by the company in excess of 13% is treated as a distribution.

    Distribution calculation
    DescriptionValue
    Amount treated as a distribution  €7,000
    Amount not treated as a distribution €13,000
    Total interest paid €20,000
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Published: 19 November 2025 Print this page

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