There is an interest-free debit loan in a company. The loan is to a connected person and thus the foregone interest on the loan is a deemed dividend. Kindly assist as to how this deemed dividend must be declared to SARS for the tax to be paid?


Author: Peter Surtees

Important:

This answer is based on tax law year ending 28 February 2021.

Answer:

Relevant tax law Section 64E(4)(b): “The amount of the dividend that is deemed to have been paid in terms of paragraph (a) must- (i) be deemed to consist of a distribution of an asset in specie”. Which means that the company must pay the dividends tax.

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