The South African Reserve Bank’s Monetary Policy Committee (MPC) has decided to raise the repo rate by another 25 basis points with effect from 24 March 2022. This increase of 0.25%, positions the Repo Rate at 4.25%, which then also increases the prime lending rate of the commercial banks to 7.75%.

Reserve Bank governor Lesetja Kganyago said in a statement on Thursday afternoon (24 March), that the rate hike comes against a backdrop of higher global and local inflation.

The SARS official rate of interest, as defined in section 1(1) of the Income Tax Act 58 of 1962 (the Act), therefore also increases.

This means that where a loan is granted to an employee by his or her employer and no interest is charged by the employer, or where the interest charged by the employer is less than the official rate of interest, the difference between the amount which would have been payable if the loan was granted at the official rate and the amount actually paid by the employee, is taxed as a fringe benefit.

The SARS official rate of interest is the Repo Rate, plus 100 basis points (1%). The SARS official rate of interest is therefore adjusted to 5.25%.