South Africa: Loan “raising fees” constituted deductible interest (Supreme Court of Appeal decision)
Qualified as “similar finance charges” under section 24J(1)(a) of the Income Tax Act 58 of 1962
The Supreme Court of Appeal (SCA) held in Commissioner v. Cornucopia Trust (469/2025) [2026] ZASCA that loan “raising fees” qualified as deductible interest in the form of “similar finance charges.”
Summary
The taxpayer was a South African property investment/leasing trust that obtained finance facilities that included 2% “raising fees” payable in two installments (50% on signing and 50% on the earlier of March 31, 2012, or when the mortgage bond was registered over the relevant property).
The taxpayer claimed such raising fees as deductible interest on the basis that they constituted “similar finance charges” under section 24J(1)(a) of the Income Tax Act 58 of 1962. The tax authority disallowed the deductions, arguing that the fees were costs of obtaining capital rather than the cost of using capital and thus did not constitute similar finance charges.
The SCA held that the raising fees constituted “similar finance charges” as defined, as the raising fee had a direct link towards the use of the underlying capital. In particular, the SCA found that the raising fees were similar to interest because they were paid for the deprivation of use of the money and to mitigate the risk of non-payment.
Read a September 2026 report prepared by the KPMG member firm in South Africa