From 1 March 2017 new and existing interest free, or low interest loans made to trusts by a natural person or a company with a connected person relationship, will be subject to the tax implications of Section 7C.
Effectively, the interest concession, being the difference between the actual rate of interest levied on the loan and the official rate of interest (currently 8% p.a.), will be deemed to be a donation in hands of the lender and subject to donations tax of 20%. Some relief may however be available through the application of the annual donations tax exemption of R100,000.
Please follow this link for more information on this topic and the exclusions that apply.
To ensure effective tax planning we urge you to contact us to arrange a consultation.
Contact STBB | Smith Tabata Buchanan Boyes on STBB.