Crowe 100 Index
2019 August Interest Rates
Tax, VAT, Fringe Benefits, Loans,Donations Tax and Dividends Tax
Tax and VAT - Interest Rate Increases
It is important to remember that interest and penalties paid to SARS are not
deductible expenses for income tax purposes. On the other hand, interest received
from SARS is fully taxable (after deducting the current initial exemption of R23 800
per annum (R34 500 if you are 65 or older) for all local interest income earned by
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Income Tax, Provisional Tax, Dividends Tax, etc
Payable to SARS on short payments
of all such taxes (other than VAT):
10.25% per annum from 1 March
2019 (was 10% per annum with
effect from 1 July 2018).
Payable by SARS on refunds of tax
(where interest is applicable): 6.25%
per annum from 1 March 2019 (was
6% per annum with effect from
1 July 2018).
If the refund is made after a
successful tax appeal or where the
appeal is conceded by SARS, the
interest rate is 10.25% per annum
from 1 March 2019 (was 10% per
annum from 1 July 2018).
Payable to SARS on late payments: 10.25% per annum from 1 March 2019 (was 10% p.a. from 1 July 2018).
Payable by SARS on VAT refunds
after prescribed period: 10.25% per
annum from 1 March 2019 (was 10%
from 1 July 2018).
Official interest rate for loans to employees below which a deemed fringe benefit arises: 7.5% per annum from 1 August 2019 (was 7.75% per annum from 1 December 2018). See below for details.
Official interest rate for loans (designated in Rands) to shareholders below which the interest on such loans can be deemed to be dividends on which Dividends Tax is payable: 7.5% per annum from 1 August 2019 (was 7.75% per annum from 1 December 2018). See below for details.
The amount of penalties for late payments (where applicable) are substantial (at least 10%) and are in addition to interest charged.
Fringe Benefits, Loans, Donations Tax and Dividends Tax - Interest Rates
If inadequate interest is charged to an employee (including working directors) on loans (other than for the purpose of furthering his own studies) in excess of R3 000 from his employer (or associated institution), tax on the fringe benefit may be payable.
Unless interest is charged at the “official” rate or greater, the employee is deemed to have received a taxable fringe benefit calculated as being the difference between the interest actually charged and interest calculated at the “official” rate.
For employees' tax purposes, the tax deduction must be made whenever interest is payable. If not regularly, then on a monthly basis for monthly paid employees, weekly for weekly paid employees, etc.
Subject to a number of exceptions, distributions of income and capital gains from a company / close corporation are normally subject to Dividends Tax at the flat rate of 20%. Loans or advances to or for the benefit of a shareholder / member will be deemed to be dividends but only to the extent that interest at less than the “official” rate (or market related rate in the case of foreign currency loans) is payable on the loan or fringe benefits tax is payable on an interest free (or subsidised interest) loan to an employee.
It is not the amount of the loan but the interest reduction which is deemed to be a dividend. Low interest loans are accordingly subject to Dividends Tax payable by the company and only in respect of the interest benefit.
Loans to Trusts by natural connected persons with interest charged below the official rate create a donation subject to donations tax at 20%. Contact us for more details.
With effect from 1 March 2011, the official rate has been defined as the rate of interest equal to the South African “repo rate” plus 1%. For foreign currency loans, the rate is the equivalent of the foreign “repo rate” plus 1%. The South African repo rate is currently 6.5% p.a.
The “official” rate of interest over the past 5 years
With effect from 1 August 2014 - 6.75% p.a.
With effect from 1 August 2015 - 7.0% p.a.
With effect from 1 December 2015 - 7.25% p.a.
With effect from 1 February 2016 - 7.75% p.a.
With effect from 1 April 2016 - 8.0% p.a.
With effect from 1 August 2017 - 7.75% p.a.
With effect from 1 April 2018 - 7.5% p.a.
With effect from 1 December 2018 - 7.75% p.a.
With effect from 1 August 2019 - 7.5% p.a.
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Crowe Taxation Cape (Pty) Ltd
+27 21 481 7000
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