South Africa Interest Rate Change

With effect from 1 June 2023, the “official rate of interest” for determining the taxable benefit on low interest or interest-free loans has raised by 0.50%.

When an employee obtains a loan from his employer and either no interest is payable or the interest payable is less than the “official rate of interest,” the difference between the amounts calculated at the official rate of interest and the amounts calculated at the employer’s interest rate is a taxable fringe benefit. The fringe benefit value must be handled in payroll and submitted on the tax certificate against the IRPS code 3801 for general fringe benefits.

Section 1(1) of the Income Tax Act defines the “official rate of interest” as the rate of interest equal to the RSA repurchase rate (“repo rate”) plus 100 basis points (1%). The official rate of interest varies on the first day of the month following the date of the repo rate adjustment. The repo rate increased from 7.75% to 8.25% on May 26, 2023, raising the official interest rate to 9.25% beginning June 1, 2023.

 

Kind Regards

CPI Payroll Support Team

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