Interest deduction limitations: section 23M of the Income Tax Act

Tax Break: South African tax for professionals · Sep 17, 2026 · 13m

When does section 23M of the Income Tax Act limit the interest a company can deduct on debt owed to a creditor in a controlling relationship, and why is it not just a cross-border rule? This episode of Tax Break highlights three pointers for identifying whether s 23M applies.

Pieter starts with the origin of the provision in the 2013 Amendment Act alongside the OECD BEPS Action 4 work on interest deductibility, and the early commentary linking it to thin capitalisation, transfer pricing and the withholding tax on interest.

The first pointer is the controlling relationship requirement: the 50%…