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Thread: Shareholders interest Tax deductible?

  1. #1
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    Shareholders interest Tax deductible?

    Hi All,

    A shareholder received about R17,000 interest income on his loan to his business. He is the majority shareholder.
    He declares this interest income on his tax return and receives the tax exemption on the interest received.
    I understand the company can deduct the interest because it is in the production of income. (The loan was used to buy equipment, etc.)
    But I stumbled upon section 23M of the Income Tax Act that prohibits interest from "controlling persons" persons as a deduction for the company if it was not subject to tax in the hands of the shareholder?

    So my question is: If the shareholder did not pay tax on the interest due to the exemption for individuals, can the company deduct the interest for tax purposes?

    Thank you for your help!

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    Hi Loidf

    It was taxable, but less than the exempted amount, so the interest can be deducted by the company.

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