The South African Reserve Bank’s Monetary Policy Committee (MPC) has announced a reduction in the Repo Rate by 25 basis points, effective 31 July 2025. This marks the third rate cut in 2025.
The Repo Rate, which serves as the benchmark interest rate at which the Reserve Bank lends to commercial banks, will now be 7.00%. Consequently, the prime lending rate offered by commercial banks will decrease to 10.50%.
Impact on SARS Official Rate of Interest
In terms of section 1(1) of the Income Tax Act 58 of 1962, the SARS “official rate of interest” is defined as the Repo Rate plus 100 basis points (1%). This rate applies in situations where an employee receives a low-interest or interest-free loan from their employer. The difference between the interest charged and the official rate is treated as a taxable fringe benefit.
With the Repo Rate now at 7.00%, the official rate of interest will be adjusted to 8.00%, effective 1 August 2025.
