Loan - Benefit

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Loan - Benefit

A loan benefit arises on the provision of a loan to an employee where the interest rate charged on the loan is less than the LIBOR (London Inter-Bank) rate  plus 5% and the loan amount exceeds USD100. No benefit interest is being charged above the LIBOR rate plus 5%.   Different rates apply to loans in Zimbabwe  currency for loan amounts exceeding a specified amount.  These rates and amounts need to be checked when processing loans.

 

A loan benefit arises if the interest charged on any loan received by an employee is less than the LIBOR rate plus 5%.  The value of the loan should also be above the specified amount.  The value of the LIBOR rates is specified by ZIMRA and is included in the Finance Act. Speak to a tax consultant or ZIMRA for advice on what rate to use for LIBOR.

 

To Setup the loan benefit in the tax parameters:

Go to the 'Setup', then 'Tax Parameters' menu options

Go to the Loan Benefit section of the screen, as shown below

Enter the Loan amount above which a loan benefit applies ('Loan To')

Enter the loan interest rate percentages for benefit purposes

 

In this example loans above USD100 are being considered for loan benefit.

 

The loan benefit is calculated as follows:

Amount of interest that would be charged on the loan at 7%, less

Amount of interest actually charged on the loan for the period

 

TaxTableTab1b

 

If a loan is extended to an employee where there is a low, or no, interest being charged ZIMRA may deem this to be a benefit being received by the employee and therefore subject to taxation.  The criteria used is that the loan capital amount should $100, or more and if the interest being charged is less than 6.5% per annum then there is a benefit.

 

Example

 

Loan - Benefit

 

The amount of the benefit is calculated as:

 

Balance of loan at beginning of period x (ZIMRA deemed benefit rate of interest per annum - actual interest charged per annum)/ number of number of periods in the year)

= $4000 x (6.5% - 0)/12

= 21.67

 

This amount comes through automatically onto the payslip input of the employee:

 

Loan - Benefit (Payslip Input)