The South African Revenue Service (SARS) has announced a reduction in the official interest rate Table 3 for taxation on interest-free or low-interest loans, lowering it from 8.75% to 8.50%, effective 1 February, 2025.
This change follows a 25-basis point cut in the repo rate by the Reserve Bank’s Monetary Policy Committee on 30 January 2025.
The updated rate impacts employees who incur debts to their employers, associated institutions, or other parties under employer arrangements, with any difference between the official interest rate and the actual interest paid being taxed as a fringe benefit.
Earlier, the South African Revenue Service (SARS) published updated interest rate tables on 22 November 2024. Interest rates charged in terms of the legislation administered by SARS are split into three main categories, namely:
- interest charged on outstanding taxes, duties and levies and those payable in respect of refunds of tax on successful appeals and certain delayed refunds
- interest payable on credit amounts (overpayment of provisional tax) in terms of section 89 quat(4) of the Income Tax Act, 1962
- interest applicable to a loan denominated in the currency of the Republic, as described in paragraph (a) of the definition of ‘official rate of interest’ in section 1(1) of the Income Tax Act, 1962
Table 3 – The income tax rates for interest-free or low-interest loans will be reduced from 9.00% to 8.75%, effective 1 December 2024.
