The Rate of Interest for calculating the Fringe Benefit Value on an Employer provided low or no interest loan has decreased by another 1% effective 1 May 2020
Where an Employer provides an Employee with a loan and either charge zero interest or a rate that is below the Official Rate of Interest, the difference between the two (ie the benefit to the Employee) must be treated as Taxable Fringe Benefit.
This Fringe Benefit should be processed via the payroll and reported on the Employees’ IRP5 against SARS Code 3801.
The Official Rate of Interest is defined in the Seventh Schedule as the rate of interest that is equal to the Repo Rate, plus 100 basis points (i.e. 1%).
The Repo Rate has decreased to 4.25 % as of the 15 April 2020, and the Official Rate of Interest, therefore, has decreased to 5.25% effective 1st of May 2020, ie the first day of the month following the announcement.