The South African Revenue Service (SARS) has decreased, by one percentage point, the interest rates it charges on outstanding taxes, duties and levies, as well as the interest rates it pays on tax refunds.
The reduction takes effect from November 1 this year.
The following interest rates will apply with effect from November 1:
- The rate at which interest will be charged in respect of outstanding tax will decrease from 11.5 to 10.5 percent.
- The rate at which interest will be paid to taxpayers in respect of refunds of provisional tax overpaid will decrease from 7.5 to 6.5 percent.
- The rate at which interest will be paid to taxpayers on refunds of tax where an appeal is upheld in court or conceded by the Commissioner for SARS will decrease by one percentage point from 11.5 to 10.5 percent.
The recent 0.5-percentage point change in interest rates has also affected the "official rate of interest", which you need to use to calculate taxable fringe benefits.
In terms of the Income Tax Act, a taxable fringe benefit arises when you obtain a loan from your employer on which you pay no tax, or tax at a rate that is lower than the "official rate of interest" prescribed by the Minister of Finance.
The fringe benefit on which you must pay tax is the difference between the amount of interest you would have paid if the loan was at the "official rate of interest" and the amount of interest you actually paid.
The Minister of Finance has approved a drop in the "official rate of interest" from nine percent to 8.5 percent, with effect from September 1 this year.