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Tax consequences from the writing-off of loans

South Africa

Companies often have high levels of debt as a result of intercompany loans that are often written-off for various reasons. Taxand South Africa takes a look at the ramifications arising from the writing-off of loans.

In virtually every corporate structure there are a multitude of inter-company loan accounts. These loan accounts often arise either through funding being provided by one company to another or in circumstances where, for example, a company provides services or sells goods to another company and the consideration remains outstanding on loan account. 

Often such loan accounts are written off, particularly in circumstances where the borrower is not able to repay the loan or, in a group context where the group wishes to “clean up” its inter-group transactions.

Considerations include:

  • Section 24J of the Income Tax Act
  • Debt reduction provision
  • Cost price reduction
  • Ordinary revenue or recoupment
  • CGT implications
  • Donations tax

Discover more: Tax consequences arising from the writing off of loans


Your Taxand contacts for further queries are:
Peter Dachs
T: +27 11 269 7891
E: pdachs@ENSafrica.com

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Taxand's Take

Multinationals and national corporations should realise that a multitude of tax issues must be considered before writing off a loan.

Taxand's Take Author

Peter Dachs
South Africa
Sub-Saharan Africa

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