[Question] If you get an interest-free or low-interest loan - Taxation

[Debbie Mitchell]

Good Day

I wonder if someone can advise on the below:

I read somewhere that If you get an interest-free or low-interest loan, is it also seen as a perk and gets taxed.

Does this apply only to Individuals or does it also apply to Companies and Closed Corporations?

How would this get taxed?

Many Thanks

[Andromeda]

No, it is not taxed

[GCE]

Happen to be reading the SARS External guide and remembered the question asked -
This is a copy and paste from the document and a link to the full document

https://www.sars.gov.za/wp-content/uploads/PAYE-GEN-01-G19-Guide-for-Employers-iro-Employees-Tax-for-2025-External-Guide.pdf

FRINGE BENEFITS
Reference to the Act
Fringe benefits
Other references
Remuneration definition in Paragraph 1 of the Fourth Schedule
All paragraphs of the Seventh Schedule
•
A taxable benefit is deemed to have been granted by the employer if, as a benefit or advantage of, or by virtue of such employment or as a reward for services rendered or to be rendered, the employee is granted one of the benefits described in Paragraph 2 of the Seventh Schedule, namely:

Acquisition of an asset at less than the actual value (money excluded);

Right of use of a motor vehicle;

Right of use of an asset (excluding a motor vehicle and residential accommodation);

Meals, refreshments or meal and refreshment vouchers

Residential accommodation;

Free or cheap services;

Low or interest free loans;

Subsidy in respect of loans (interest or capital repayments);

Payment of employee’s debt or release of the employee from the obligation to pay a debt;

Medical fund contributions paid on behalf of an employee;

Medical costs (other than contributions) paid for the benefit of an employee;

Contributions to a benefit fund;

Contribution to bargaining council;

Payment to an insurer under an insurance policy; and/or;

Any benefit granted to the relative of employee and others.
•
Special provisions exist for determining the amount which must be included in the taxable remuneration of an employee due to any of these benefits being granted to the employee. For more information refer to Guide for Employers in respect of Fringe Benefits – External Guide which is available on the SARS website www.sars.gov.za.

[Andromeda]

The OP asked this:
Does this apply only to Individuals or does it also apply to Companies and Closed Corporations?

I assume the OP is asking about Companies and Close Corporations.

Your accurate response refers to natural persons.

[GCE]

The OP asked this:
Does this apply only to Individuals or does it also apply to Companies and Closed Corporations?

I assume the OP is asking about Companies and Close Corporations.

Your accurate response refers to natural persons.

Good point - Problem when I don't read the question again before posting

[Andromeda]

But you may be right!

[Dave A]

Both posts were useful. GCE just answered the question a different way.

All good