HomeHome SearchSearch MenuMenu Our productsOur products

Revealed: Five transactions that lead to unproductive interest

by , 25 July 2013
Assuming that interest paid on transactions is tax deductible could be a very costly error. SARS won't let you get away with deducting unproductive interest. Read on to discover the type of transactions that lead to unproductive interest so you won't make a tax deduction on them.

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!

  1. A loan to cover private expenses, for example, a family vacation;
  2. A loan to buy out one of your business partners, for instance, by buying his shares in the company through which you run your business;
  3. A loan to pay dividends to the company's shareholders;
  4. 4A loan to buy your residential home; or
  5. A loan to buy an investment that yields income that isn't subject to income tax, for example, shares bought as a long-term investment which are currently exempt from income tax.

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!



Related articles




Related articles



Related Products



Comments
0 comments


Recommended for You 

  Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance



Here are all the most interesting, thought-provoking and common tax questions
asked by our subscribers over the last tax year – everything from A to Z!

To download Quick Tax Solutions for Busy Taxpayers – 35 tax answers at a glance click here now >>>
  Employees always sick? How to stop it today



Make sure you develop a leave policy to regulate sick leave in your company.

BONUS! You'll find an example of the leave policy and procedure in this report.

To download Employees always sick? How to stop it today click here now >>>
  Absenteeism: Little known ways to reduce absenteeism



This FREE e-report will tell you how you can reduce absenteeism in your workplace while avoiding the CCMA and without infringing your employees' labour rights.

To download Absenteeism: Little known ways to reduce absenteeism click here now >>>
  7 Health & safety strategies to save you thousands



Don't let a health and safety incident cost you one more cent. Implement these seven
strategies in your company today.

To download 7 Health & safety strategies to save you thousands click here now >>>