Tax on Interest Free Loans

Dear Client

You may have read of the recent ruling by the Supreme Court of Appeal, in which it was decided that the provision to Companies of interest free loans gives rise to taxable income in the Company’s hands.

Clearly in our environment many shareholders/directors/members advance funds on non-interest bearing loans to their Companies and/or Close Corporations and/or Trusts.

It is unclear at this stage as to what the implication will be in such instances and depending on the South African Revenue Services intervention, it could lead to many reassessments being issued.

We are at this stage endeavouring to seek clarification on this extremely sensitive matter. In the meantime, we have attached a tax information sheet from our Tax Consultants, Mallinicks, for your perusal and we will remain vigilant on this matter as the nature of its application unfolds.

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Should you require any further information, please do not hesitate to contact us.

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