Abstract
M.Comm.
The purpose of this study is to discuss the deductibility of interest paid. Interest income is ignored for the purposes of this document. This study investigates the South African tax consequences of the eductibility of interest paid only. Interest is not defined in the Income Tax Act (South Africa, 1962) and therefore gives rise to litigation. Case law is an important source of this study.
The deductibility of interest paid is of great importance, because of the aggressive globalization of groups of companies and the relaxation of exchange control. The companies should structure their finances in such a way that the interest on the financing of their new overseas ventures is still deductible and that the structuring does not give rise to diversionary transactions and be open to attack by SARS.