What is a director’s loan? (And why SARS cares)
July 23, 2025 at 10:00 PM
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A director’s loan happens when you, as a director or shareholder of your company, either:

  • Take money from your company that’s not a salary or dividend, or
  • Lend money to your company from your personal funds.

Sounds simple, right? But SARS sees this very differently if it’s not handled properly — and it can trigger unwanted tax consequences.

Common Examples

  • You use company funds for personal purchases.
  • You take a “temporary loan” from the business that’s not repaid.
  • You personally pay business expenses and the company owes you.

🔎 SARS and Director’s Loans: What You Should Know

💼 1. If the company owes YOU (loan from you to company):

  • No problem — this is treated like any other loan.
  • You can charge interest if you like.
  • Any interest earned is taxable in your hands as investment income.

🧨 2. If YOU owe the company (loan from company to you):

This is where things get tricky.

⚠️ Section 64E(4): Deemed Dividend Risk

If:

  • You’re a shareholder or connected person, and
  • The loan is not repaid, and
  • It's not part of a legitimate business transaction,

👉 SARS may treat the loan as a deemed dividend, and charge Dividends Tax at 20%, even though you never declared one.

⚠️ Fringe Benefit Tax (Section 8(f))

If the company gives you an interest-free or low-interest loan, SARS may view the interest saving as a fringe benefit.

This means:

  • The company must declare the benefit on your IRP5, and
  • You pay tax as if you earned that interest as income.

💡 Best Practices

  • Don’t treat the company as your personal ATM.
  • Keep clear records of all director-related transactions.
  • Rather declare a salary (subject to PAYE) or a dividend (subject to Dividends Tax).
  • If it’s a genuine loan, charge interest at SARS' official rate.
  • Set repayment terms and keep a written agreement.

🤝 How We Help

At MyFinance-Online, we:

  • Track shareholder and director loan accounts
  • Advise you on how to withdraw funds without triggering tax
  • Help avoid SARS audits and unnecessary penalties

Need help cleaning up your director’s loan account? Let’s chat.