Is a company that pays interest on a loan account
of a director, obliged to submit a third party return?
Q: If a private company pays a director interest on his loan account, does
that company have to issue a document of some sort like an IT3B?
A: The obligation to
submit third party returns (IT3(b)) is now regulated in terms of section 26 of
the Tax Administration Act(TAA) and not
by section 69 of the Income Tax Act(ITA). Unlike section 69 of ITA, Section 26 of
the TAA only requires submission of such return if such required is imposed by
public notice (GG36346 14 Jun 13). Currently, in our view, this notice only
imposes such reporting obligation on a private company if that company is a
"financial institution” as defined in the notice or is a connected person to a
JSE listed company.
Disclaimer: Nothing in this query and answer should be construed as
constituting tax advice or a tax opinion. An expert should be consulted for
advice based on the facts and circumstances of each transaction/case. Even
though great care has been taken to ensure the accuracy of the answer, SAIT do
not accept any responsibility for consequences of decisions taken based on this
query and answer. It remains your own responsibility to consult the relevant
primary resources when taking a decision.
Section 240A of the Tax Administration Act, 2011 (as amended) requires that all tax practitioners register with a recognized controlling body before 1 July 2013. It is a criminal offense to not register with both a recognized controlling body and SARS.