Tax deductibility of interest and finance charges: the real cost of credit

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dc.contributor.authorHaines, Chantelle
dc.date.accessioned2019-04-05T14:13:06Z
dc.date.available2019-04-05T14:13:06Z
dc.date.issued2017
dc.descriptionA research report submitted to the Faculty of Commerce, Law and Management, University of the Witwatersrand, Johannesburg, in partial fulfilment of the requirements for the degree of Master of Commerce (Specialising in Taxation), Johannesburg 2017en_ZA
dc.description.abstractBorrowers will commonly incur various finance charges when acquiring loan funding, which may include, inter alia, interest expenditure, guarantee fees, introduction fees, commitment fees and service fees. The tax deductibility of these finance charges is an important consideration for borrowers. Prior to the amendment of the definition of ‘interest’ in section 24J of the Income Tax Act 58 of 1962 (as amended), related finance charges were deductible for tax purposes. The term related finance charges was interpreted very widely by the Supreme Court of Appeal in C:SARS v South African Custodial Services (Pty) Ltd1 to include guarantee fees, introduction fees, commitment fees and even selected service fees. It is submitted that following the recent amendment of the interest definition by the Taxation Laws Amendment Act 15 of 2016, to now allow the deduction of ‘similar finance charges’ rather than ‘related finance charges’ the tax treatment of finance charges are uncertain. The objective of this study is to evaluate how this amendment will affect the deductibility of finance charges incurred by borrowers for tax purposes. The study proposes to first evaluate whether finance charges will be deductible in terms of section 24J, consider the definition of ‘interest’ and provide some general tests aimed at assessing the ‘trade requirement’ and the meaning of the phrase ‘in production of income’. The impact of the anti-avoidance legislation in sections 8F and 8FA will be considered, and finally, a brief discussion of the deductibility of finance charges in terms of the general deduction formula in section 11(a) read with section 23(g).en_ZA
dc.description.librarianXL2019en_ZA
dc.facultyFaculty of Commerce, Law and Management
dc.format.extentOnline resource (55 leaves)
dc.identifier.citationHaines, Chantelle, (2017) Tax deductibility of interest and finance charges: the real cost of credit, University of the Witwatersrand, Johannesburg, https://hdl.handle.net/10539/26712
dc.identifier.urihttps://hdl.handle.net/10539/26712
dc.language.isoenen_ZA
dc.rights.holderUniversity of the Witswatersrand, Johannesburg
dc.schoolSchool of Accountancy
dc.subjectFinance charges
dc.subjectLoan funding
dc.subjectInterest expenditure
dc.subjectGuarantee fees
dc.subjectIntroduction fees
dc.subjectCommitment fees
dc.subjectService fees
dc.subjectAnti-avoidance legislation
dc.subject.lcshCredit
dc.subject.lcshConsumer credit
dc.subject.lcshBank loans
dc.subject.otherSDG-8: Decent work and economic growth
dc.titleTax deductibility of interest and finance charges: the real cost of crediten_ZA
dc.typeDissertationen_ZA
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