South Africa: Tax implications of introduction of ZARONIA as key reference interest rate
Implications for interest income, capital gains, and additional transitional payments
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November 7, 2025
The South African Reserve Bank has introduced the South African Rand Overnight Index Average Rate (ZARONIA) as a replacement for the Johannesburg Interbank Average Rate (JIBAR) as the key reference interest rate for Rand-denominated financial contracts.
This rate reform will have the following tax-related implications:
- Interest and section 24J: The transition to ZARONIA may constitute a “transfer” under section 24J of the Income Tax Act (ITA), with related tax consequences. In addition, yield to maturity under section 24J must be recalculated, as future interest payments will differ from those originally projected.
- Capital gains tax: To the extent that there is a variation in a lender’s right to receive interest arising from the transition from JIBAR to ZARONIA, the taxpayer will have to assess whether this potentially constitutes a disposal for tax purposes subject to capital gains tax.
- Additional transitional payments: If additional payments are made to facilitate the transition of legacy contracts, the tax implications of such payments must be considered. Relevant provisions include the general gross income principles, section 11(a), paragraph 20 of the Eighth Schedule, and potentially sections 24J or 24JB of the ITA.
Read a November 2025 report prepared by the KPMG member firm in South Africa