ARTICLE · 23 NOVEMBER 2022

SARS Announces Its Intention To Withdraw Practice Note 31

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On 15 November 2022, the South African Revenue Service ("SARS") announced its intention to withdraw Practice Note No. 31 ("PN31"), which relates to the interest paid...

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Michael Reifarth

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On 15 November 2022, the South African Revenue Service ("SARS") announced its intention to withdraw Practice Note No. 31 ("PN31"), which relates to the interest paid on borrowed money proclaimed in the Government Gazette No. 16018 of 14 October 1994. The intended withdrawal will apply for years of assessment commencing on or after 1 March 2023.

In terms of PN31, it is SARS' practice to allow taxpayers a deduction of interest paid in instances where such interest is incurred in the production of interest income on capital or surplus funds invested, where such taxpayer is not a moneylender and does not carry on a trade. In particular, the Practice Note states as follows:

"While it is evident that a person (not being a moneylender) earning interest on capital or surplus funds invested does not carry on a trade and that any expenditure incurred in the production of such interest cannot be allowed as a deduction, it is nevertheless the practice of [Inland Revenue]

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