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BPR 142: Deduction of interest expenditure

Friday, 05 April 2013   (0 Comments)
Posted by: SAIT Technical
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By SARS Legal & Policy

SARS issued Binding Private Ruling (BPR) 142 on 04 April 2013.


This ruling deals with the tax treatment of interest expenditure incurred by a subsidiary in a group of companies (the group) on amounts borrowed and on-lent to other subsidiaries within the group.


The Applicant (a private company incorporated in South Africa) proposes to fund the capital investment in various operations of the group through a loan facility from a financier. The loan facility will be advanced directly to the Applicant. In turn the Applicant will on-lend the funds to other subsidiaries within the group at no margin.

The Applicant has in the past met the short term and long term funding needs of the other subsidiaries in the group. Unlike the other subsidiaries, the Applicant has assets which it will use as collateral for the loan facility.

The proposed funding will be used by the subsidiaries in respect of the –

- new development of operational infrastructure;

- replacement of operational infrastructure;

- development of supporting structure; and

- upgrade of existing operational structure.


The ruling made in connection with the proposed transaction is as follows:
- The interest payable by the Applicant on the loan facility will be allowed as a deduction under section 24J.
- The ruling does not express a view in respect of other costs,for example funding costs, and is limited to the interest expenditure to be incurred by the Applicant.

This binding private ruling is valid for a period of 5 years from 12 November 2012.

Please click here to download BPR 142.



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.

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