The “official rate of interest” for calculating fringe benefits will increase by 0.25% with effect from 1 August 2014.
Where a loan is obtained by an employee from his employer and either no interest is payable or the interest payable is less than the “official rate of interest”, the difference between the amounts calculated at the official rate of interest, and the amount calculated at the interest rate applied by the employer, is a taxable fringe benefit. The fringe benefit value must be processed in the payroll and reported on the tax certificate against the general code 3801.
Effective from 1 March 2011, the “official rate of interest” is defined in the Seventh Schedule as the rate of interest that is equal to the RSA repurchase rate (“Repo rate”) plus 100 basis points (1%). The official rate of interest changes from the first day of the month following the date on which the Repo rate change comes into effect.
The Repo rate was increased by 0.25% to 5.75% on 17th July 2014 and the Official Rate of Interest is therefore 6.75% effective from 1 August 2014.