The South African Revenue Service (Sars) has lowered the “official rate of interest” used to determine fringe benefits taxes to 9% from 9,5%, effective from March 1.
In a statement on Tuesday, Sars said the move follows the 50 basis point decrease in the repurchase (repo) rate by the South African Reserve Bank in December 2003.
The fringe benefit provisions in the Seventh Schedule to the Income Tax Act, 1962, provide that a taxable fringe benefit arises where an employee obtains a loan from his or her employer in terms of which no interest is payable; or interest is payable, but the interest is charged at a rate which is lower than the “official rate of interest” (which is a rate specifically prescribed by the minister of finance for purposes of determining the value of this type of fringe benefit).
The fringe benefit is calculated as the difference between the amount that would have been payable on the loan if interest was charged at the “official rate of interest”, and the amount actually paid by the employee. — I-Net Bridge