What is a director's loan? (And why SARS cares)
A director’s loan happens when you, as a director or shareholder of your company, either:
- Take money from your company that isn’t a salary or a dividend, or
- Lend money to your company from your personal funds.
Sounds simple, right? But SARS sees this very differently if it isn’t handled properly — and it can trigger unwanted tax consequences.
The two directions matter
You owe the company (a debit loan account). This is where most of the risk sits. If your company lends you money and charges you no interest — or interest below the official SARS rate — the shortfall can be treated as a deemed dividend, which attracts dividends tax at 20%. In other words, “just taking some money out” can quietly create a tax bill.
The company owes you (a credit loan account). This is common and generally fine. Money you’ve put into the business can usually be repaid to you over time without triggering tax, because it’s a return of your own funds rather than income.
Why SARS pays attention
The concern is simple: extracting company profits as an interest-free loan, instead of as a salary or dividend, sidesteps the tax that salary or dividends would attract. The rules around deemed dividends exist to close that gap.
How to keep it clean
- Document the loan. Have a written loan agreement with terms and an interest rate at least equal to the official rate.
- Charge and account for interest where the company lends to you, so there’s no shortfall to deem as a dividend.
- Keep the loan account accurate and reconciled — don’t let it become a dumping ground for personal expenses.
- Plan withdrawals with your accountant, so you choose the most tax-efficient mix of salary, dividends and loan repayments.
Loan accounts are one of the most common areas SARS queries. If you’re drawing money from your company, talk to us before it becomes a problem — not after.
This article is general information, not tax advice. Your situation may differ.