Results 1 to 5 of 5

Thread: Directors' Debit Loan account

  1. #1
    New Member
    Join Date
    May 2012
    Location
    johannesburg
    Posts
    8
    Thanks
    1
    Thanked 0 Times in 0 Posts

    Directors' Debit Loan account

    Hi. Is this right. If you never pay out through salaries so you don't pay PAYE over, you can leave the debit loan for as long as you like, as long as you charge interest on it.This way, if entity is cash tight to pay SARS, u just pay into the loan account and charge interest so an employee can still get a full salary amount? When entity has cash again, it can declare a dividend and pay dividend tax over. How will Sars treat this debit loan if left there for say 2 years? Will it want PAYE on the amounts paid at tax year end? thanks so much....

  2. #2
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,977
    Thanks
    3,055
    Thanked 2,462 Times in 2,067 Posts
    Blog Entries
    12
    I believe it will be treated as extracted value and taxed accordingly - essentially as a dividend paid out.
    The trouble with opportunity is it normally comes dressed up as work.

  3. #3
    Silver Member geraldenek's Avatar
    Join Date
    Jul 2008
    Location
    Somerset West
    Posts
    229
    Thanks
    19
    Thanked 112 Times in 80 Posts
    There is two sides to this - the salary that you declare you need to declare it to someone - issue an IRP5 certificate so depending on the amount the directors/members will be taxed on that amount in their personal capacities and the amount will be payable to SARS by the company. You already deducted this amount on the Income Statement of the company/cc so the tax would be less for the company.

    Just leaving it in a loan account and the loan account is in debit it would attract dividends tax @ 15%.

    But did you had a big debit loan prior to allocating the salary as the allocation should attract a credit.

    If you don't declare a salary and just use it as loan account money - then your Income statement profit will increase paying tax over at 28% and you have a debit loan with dividens tax @ 15%.
    Geraldene Kapp
    Professional Tax Help
    www.mytaxhelp.co.za

  4. #4
    New Member
    Join Date
    May 2012
    Location
    johannesburg
    Posts
    8
    Thanks
    1
    Thanked 0 Times in 0 Posts
    hi. thanks for reply. Appreciate it.
    So if the company pays an employee cash and allocates it to the loan account and not to salaries, it must charge interest on the loan at the prescibed rate. When is the loan ever deemed to be a dividend by SARS and the company will have to pay over the 15%? so can the loan stay there for many years as long as interest is being charged on it?
    So the cash flows are the company pays over the net amount to the employee's loan account, doesnt have to then pay PAYE over that month, charges interest and one fine day a few years later, the company can declare a dividend to zero the loan. It will pay higher tax at year end as it doesnt get the PAYE portion deducted off income, but atleast it helps out on the cash flow situation if the company is tight.

  5. #5
    Site Caretaker Dave A's Avatar
    Join Date
    May 2006
    Location
    Durban, South Africa
    Posts
    20,977
    Thanks
    3,055
    Thanked 2,462 Times in 2,067 Posts
    Blog Entries
    12
    Quote Originally Posted by antonnkramer View Post
    So if the company pays an employee cash and allocates it to the loan account and not to salaries, it must charge interest on the loan at the prescibed rate. When is the loan ever deemed to be a dividend by SARS and the company will have to pay over the 15%? so can the loan stay there for many years as long as interest is being charged on it?
    So the cash flows are the company pays over the net amount to the employee's loan account, doesnt have to then pay PAYE over that month, charges interest and one fine day a few years later, the company can declare a dividend to zero the loan. It will pay higher tax at year end as it doesnt get the PAYE portion deducted off income, but atleast it helps out on the cash flow situation if the company is tight.
    Ouch! My head is spinning

    Is this employee a shareholder?
    The trouble with opportunity is it normally comes dressed up as work.

Similar Threads

  1. [Question] CC Member's Loan account
    By Answers Please in forum Accounting Forum
    Replies: 3
    Last Post: 30-Mar-12, 02:30 PM
  2. [Question] Members loan account
    By vtnoracle in forum Accounting Forum
    Replies: 12
    Last Post: 27-Feb-12, 06:48 PM
  3. [Question] HELP - transfer of member loan account
    By sablelodge in forum Accounting Forum
    Replies: 3
    Last Post: 29-Jul-11, 03:32 PM
  4. Loan account in CC
    By Darko in forum General Business Forum
    Replies: 2
    Last Post: 06-May-09, 01:57 PM
  5. Directors Loan -Pty LTd
    By vamily0804 in forum General Business Forum
    Replies: 4
    Last Post: 20-Feb-09, 01:03 PM

Tags for this Thread

Did you like this article? Share it with your favourite social network.

Did you like this article? Share it with your favourite social network.

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •