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Debit Loan Accounts & DWT

Posted 21 November 2014 under Tax Questions



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I'm the sole member of a CC & have a debit loan account amount of approx R200,000 for the 2014 tax year.I believe that this raises certain DWT issues etc and was wondering if the CC charges me market related interest on this amount for the year & adds this amount to my loan account, would this solve my problem & not have to declare a dividend to balance the loan?If also heard that if the deemed dividend rule (DWT) will not apply if the loan is repaid or otherwise extinguished by the end of the following year of assessment (i.e. the year following the year in which the loan is advanced) - is this true?Many thanksMark

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TaxTimTaxTim says:
21 November 2014 at 15:05

You have one year within which to pay the loan back or if you charge a normal market related interest then you can avoid it being declared a deemed dividend.


Mark says:
21 November 2014 at 17:19

Great, thanks for your response.

Just to clarify, does this mean that if my CC's return gets submitted now for 2014, reflecting the debit loan account balance, SARS won't act on this until they've assessed the 2015 return to see whether the loan has been repaid?

Also will the situation be affected by the fact that there haven't been any salaries or bonuses paid during the year & the CC is showing a profit?


TaxTimTaxTim says:
21 November 2014 at 17:43

It should not make a difference, however next year if they do an audit and see the differences you should have everything in place by then.


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