ARTICLE · 03 MAY 2022

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SARS Issues Draft Interpretation Note On Intra-group Loans

SNG Grant Thornton

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In February this year SARS published a Draft Interpretation Note on the determination of taxable income of certain persons from international transactions covering intra-group loans.

South AfricaTax

Disebo Makhetha

In February this year SARS published a Draft Interpretation Note on the determination of taxable income of certain persons from international transactions covering intra-group loans.

The note provides taxpayers with guidance on the application of the arm's length principle in the context of the pricing of intra-group loans. The arm's length principle forms the basis of transfer pricing and is outlined in Section 31 of the Income Tax Act. Section 31 applies prior to considering the impact, if any, of sections that limit deduction of certain interest incurred on intra group loans (section 23M) and interest incurred in relation to group restructuring (section 23N).

Section 31 requires taxpayers to:

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