Before 1 April 2003, the rates of interest charged in respect of outstanding income tax, VAT, customs duties and various other taxes, as well as interest payable on refunds thereof, were determined by the Minister of Finance in terms of the relevant tax Acts. Section 80 of the Public Finance Management Act, 1999 (Act No. 1 of 1999), however, also provides for the determination of a uniform rate of interest (PFMA rate) in respect of certain debts due to the State, which include taxes, duties and levies. The various tax laws were, therefore, amended with effect from 1 April 2003 to link the interest rates in respect of outstanding taxes and certain refunds to the PFMA rate. This rate is currently fixed at 16,5 per cent. Following the recent decrease in the Reserve Bank repo rate, the Minister of Finance approved that the PFMA rate be decreased by 1,5 percentage points from 16,5 per cent to 15 per cent with effect from 1 July 2003. The rate of interest charged in respect of outstanding taxes, duties and levies is, therefore, also effectively reduced to 15 per cent with effect from 1 July 2003.
Interest payable by SARS on refunds of tax is determined at the same rate as interest charged on outstanding taxes, with the exception of interest payable on the refund of any overpayment of provisional tax. In the case of interest on refunds of provisional tax, the rate is equal to the PFMA rate minus four percentage points. Currently, this rate is 12,5 per cent and will, therefore, also be reduced to 11 per cent with effect from 1 July 2003.
The PFMA rate is published by National Treasury by way of notice in the Gazette and can be accessed on their website at http://www.treasury.gov.za.
ISSUED BY THE COMMISSIONER FOR THE SOUTH AFRICAN REVENUE SERVICE
PRETORIA