Interest-rate Change

 

When an employee obtains a loan from his employer (and either no interest is payable or the interest payable is less than the ‘official rate of interest’) then the difference between the two amounts is calculated at the official rate of interest.

[tweetthis remove_twitter_handles=”true” remove_url=”true” remove_hidden_hashtags=”true” remove_hidden_urls=”true”]Due to recent Repo rate increase by 0.25% (to 7%) on 18 March 2016, the revised official rate of interest is 8% — effective 1 April 2016[/tweetthis]

The amount is calculated at an interest rate determined by the employer. This is a taxable fringe benefit, which must be processed and indicated on the employee’s tax certificate — using the “general code” 3801.

The official rate of interest is defined 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 new month, following the date on which the Repo rate change comes into effect.

Repo Rate Change

Therefore, owing to the most recent Repo rate increase of 0.25% (to 7%) on 18 March 2016, the revised official rate of interest is 8% — effective 1 April 2016.