Most business owners take money out of their company account when they need it. A bit in January. A bit more in March. School fees paid straight from the business in April. Nobody writes any of it down — it feels too small to bother with, and there’s always a plan to “sort it out later.”
SARS doesn’t wait for later.
Every Withdrawal Must Be One of Three Things
When you take money out of your own company, it has to be classified as one of three things. What it cannot be is nothing. An undocumented withdrawal doesn’t disappear — it lands in your loan account, and that’s exactly where the tax exposure starts.
Salary. Taxed as personal income through PAYE. Declared, above board, on a payslip every month. The cleanest route — and the one most business owners actually understand.
Dividend. Your company pays 27% Corporate Income Tax on its profits. When that profit is distributed to you as a shareholder, a further 20% Dividends Withholding Tax applies. Two tax events, not one — and it must be formally declared.
Loan. Money borrowed from your own company, to be repaid. It must be documented and it must bear interest at the SARS official rate. This is the one that causes problems — because it’s the one nobody treats as a real loan.
The Real Question
Here’s what we see with our clients all the time.
A director draws R15,000 in January. Another R8,000 in March. School fees get paid straight from the business in April. A bit more comes out in June. None of it documented. None of it labelled.
Year end arrives. The loan account sits at R110,000 in debit — meaning the director owes the company more than the company owes them.
Because the loan carried no interest all year, SARS doesn’t let that slide. The interest benefit is treated as a deemed dividend under the Income Tax Act. SARS calculates what the interest should have been at the official rate — currently 8% per annum — on R110,000 over the year. That comes to roughly R8,800 in deemed interest. The company then pays 20% Dividends Withholding Tax on that amount: approximately R1,760 to SARS.
And that’s the floor, not the ceiling. If a formal dividend or additional salary is later declared to clear the balance, further tax consequences apply on top. It compounds every year the loan runs undocumented.
None of this was planned for. None of it was budgeted. The whole bill traces back to small, undocumented withdrawals that felt harmless at the time.
The Part Most Business Owners Don’t Know
If the loan is entirely interest-free, SARS may also treat the benefit as a fringe benefit — taxable in your hands personally, separate from what the company pays.
This isn’t an obscure rule reserved for complicated structures. It applies to every owner-managed company in South Africa. If you’ve ever drawn cash from your business without a formal loan agreement, this almost certainly applies to you right now.
What To Do About It
Label every withdrawal immediately. Salary, dividend, or loan — decide which one it is the day the money leaves the account, not at year end. Tell your bookkeeper the same day.
Check your loan account every quarter. If it’s heading into debit, there’s still time to plan. A formal dividend can be declared, or the balance can be repaid, before year end turns a manageable number into a tax bill.
If you’re going to borrow from your own company — do it properly. Document it with a loan agreement. Charge interest at the SARS official rate, currently 8% per annum. This rate moves with the repo rate, so always confirm the current figure with your accountant before relying on it. Without that paper trail, SARS assigns the outcome for you — and it’s rarely the one you would have chosen.
The Mindset Shift
Most business owners think of cash withdrawals as informal — a perk of owning the business, sorted out whenever there’s time.
Flip it around.
Taking money from your business isn’t the problem. Taking it without a plan is. Every rand that moves from your company to you needs to land somewhere on purpose. The businesses that avoid a year-end surprise aren’t the ones that never draw cash — they’re the ones who labelled it the moment it happened.
Keep It Simple
- Every withdrawal needs a category — salary, dividend, or loan. Not “later.”
- An interest-free or below-rate director loan triggers a deemed dividend — the company pays 20% DWT on the interest benefit
- Interest-free loans can also trigger fringe benefit tax, payable by you personally
- If a loan exists, it must be documented and carry interest at the SARS official rate — currently 8% per annum, which moves with the repo rate, so confirm the current figure with your accountant
- Check your loan account balance every quarter — don’t discover the problem at year end when it’s too late to plan around it
Taking money from the business isn’t the problem. Taking it without a plan is.
General information only — chat to your accountant about your specific situation.