If you have a fixed deposit with interest on expiry after five years, when do you pay tax on the interest?
It seems that SARS is taxing it every year on what has accrued each year, but surely this causes a cash flow issue for the investor as you are having to pay tax on something you only get in five years time? If this is the case why would anyone take interest on expiry?
If the interest is below R23,800 (under 65 years old) or below R34,500 (over 65 years old), there will be no tax payable. Unfortunately tax is payable on amounts that accrue to taxpayers, regardless of when this money is paid. This is actually more advantageous than if you only paid tax at the end of five years, as you obtain the interest exemption each year.
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