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Thread: Loan cash from CC - Fringe Tax

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    Loan cash from CC - Fringe Tax

    I want to borrow cash from the CC ( I am the sole member ).

    Just for discussion, lets say R 100 k.

    How do I process this ?

    Assuming I need to :
    DR Bank Account.
    CR Short Term Loan Account ?

    What rate of interest do I use - the 'official' SARS rate of 7% ?

    Is interest calculated once off on the capital amount, or calc and compond monthly ?

    Where do I show the interest in the books each month : DR Interest Received and CR Short Term Loan Account ?

    As the rate of 7% is the same as the SARS rate for low-interest loans, must it ( or the fringe benefit ) be shown on the members IRP5 ?

    If so, what codes and what amounts ?

    Or is it only to appear on the members personal income tax forms when filed ?

    Or is it a case that if the interest rates are both the same (7%) that there is therefore no fringe benefit, and it therefore does not need to be added to the IRP5 or the income tax form ?
    Watching the ships passing by.

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    Quote Originally Posted by daveob View Post
    I want to borrow cash from the CC ( I am the sole member ).

    Just for discussion, lets say R 100 k.

    How do I process this ?

    Assuming I need to :
    DR Bank Account.
    CR Short Term Loan Account ?
    CR Bank DT Loan Account

    What rate of interest do I use - the 'official' SARS rate of 7% ?
    8.5%
    Is interest calculated once off on the capital amount, or calc and compond monthly ?
    Compounded monthly
    Where do I show the interest in the books each month : DR Interest Received and CR Short Term Loan Account ?
    DT Loan Acc CR Interest Receive
    As the rate of 7% is the same as the SARS rate for low-interest loans, must it ( or the fringe benefit ) be shown on the members IRP5 ?
    The loan is the result of a beneficial interest in the equity, hence it is a shareholders loan (company, cc, no difference. The difference in interest charged and 8.5 (you say 7 - you may be right) is a distribution of profit and therefore not a fringe benefit, which only an employee can receive. The distribution is treated exactly the same as a dividend and must be accounted for and the tax paid, by the CC, without any SARS intervention
    If so, what codes and what amounts ?

    Or is it only to appear on the members personal income tax forms when filed ?

    Or is it a case that if the interest rates are both the same (7%) that there is therefore no fringe benefit, and it therefore does not need to be added to the IRP5 or the income tax form ?
    I think your 7% would be in respect of a normal loan to an employee. In your case I would suggest 8.5, who cares actually, because it's the same money, is it not?

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