You're not allowed to claim unproductive interest as a deduction and SARS could impose serious penalties for attempting to claim it, says cautions the Practical Tax Loose Leaf Service.
But what exactly is unproductive interest?
Unproductive interest is the interest you pay but aren't allowed to deduct from tax.
It's important that you're aware of transactions that'll result in this so you don't make the mistake of claiming a tax deduction on them.
Which transactions lead to unproductive interest?
If you've taken out a loan for any of the following reasons, you can't claim the interest on the loan as a tax deduction. SARS will see it as unproductive interest!
Remember, you're not a private equity fund. It'll be difficult for you to convince SARS that taking out debt to make investments is part of your business and in the production of income!