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Tax on Loans

Posted 1 December 2015 under Tax Questions



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Mike says:
28 November 2015 at 6:53

If my brother gave me an interest free open-ended loan - what would the tax implications be?

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TaxTimTaxTim says:
30 November 2015 at 17:22

If the loan is interest free, there would be no tax implications.
However, be mindful of the fact that if it is not going to be paid back then it would be considered to be a donation which would attract donations tax (payable by your brother) at 20% for the amount over R100K per annum.


Mike says:
30 November 2015 at 18:04

Thank you so much for your reply. Very helpful. Further to this - if the loan is interest free and a period of 10 years lapses before the loan is paid back then I presume that this would imply that there would be no tax due to the fact that one could use the R 100 K per annum. I am correct in this assumption?


TaxTimTaxTim says:
1 December 2015 at 8:45

If the loan is paid back, there are no tax implications as it is interest free.
If for some reason, the terms change and a portion of the repayment is waived, then that portion will become a donation and will attract tax but individuals can donate up to R100K per year tax free.


Mike says:
1 December 2015 at 12:03

many thanks!


TaxTimTaxTim says:
1 December 2015 at 12:21

Only a pleasure!


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