SARB finalises removal of interest rate caps on inward foreign loans
SARB finalises removal of interest rate caps on inward foreign loans
By Hanro Pienaar, Transfer Pricing Consultant
SARB relaxes inward foreign loan rules – but related-party funding still needs Transfer Pricing support
South African businesses raising offshore funding have been given more flexibility. In March 2026, the SARB signalled that it would remove the prescribed interest rate criteria for inward foreign loans and foreign trade finance facilities obtained by South African residents from non-residents. That proposal has now been finalised. Exchange Control Circular 5/2026, issued on 8 April 2026, confirmed the release of final Exchange Control Circulars 6 to 14 after public comment, with Exchange Control Circular 14/2026 dealing specifically with inward foreign loans and foreign trade finance facilities.
The immediate headline is that the old prescribed interest rate criteria have fallen away. That should make it easier to structure inbound funding, but it does not remove the need to demonstrate that the pricing is commercially supportable. Authorised Dealers may now approve new inward foreign loans and foreign trade finance facilities, provided the rate is market related in the country of denomination and/or normal in the trade concerned. That reference to the “country of denomination” matters. It means the pricing question is no longer just whether the rate looks reasonable in general terms, but whether it stands up against the market conditions relevant to the currency and facts of the particular arrangement. For related-party funding, that puts transfer pricing support firmly in focus.
The Financial Surveillance Department will continue to monitor these facilities through the Loan Reporting System, and Authorised Dealers remain responsible for accurate and comprehensive reporting.
The TP position
From a transfer pricing perspective, the tax rules have not changed. What has changed is the practical importance of having the right support ready when related parties are involved. In those cases, Authorised Dealers must obtain confirmation from senior management of the applicant company that transfer pricing documentation is maintained in line with SARS requirements. They are also directed to SARS Interpretation Note 127, which deals with the transfer pricing and interest limitation issues relevant to connected-party cross-border loans. In practice, that means businesses should expect transfer pricing to play a more visible role in getting related-party funding over the line.
Importantly, this is not the first time exchange control administration has leaned on transfer pricing. A similar approach has already been adopted for certain related-party royalties and fee payments, where Authorised Dealers were expected to rely on transfer pricing support and senior management confirmation instead of a separate prior approval process. Circular 14 therefore fits into a wider pattern: SARB is streamlining formal approval processes, but expecting stronger transfer pricing support and internal governance in return.
The client takeaway is simple: easier does not mean light-touch. Groups using cross-border related-party funding should act now to test whether their intercompany loan pricing is defensible by reference to the relevant currency market, whether their transfer pricing documentation is current and transaction-specific, and whether management can confidently give the confirmations their Authorised Dealer will expect. The same discipline should also be applied more broadly across related-party royalties, service fees and other cross-border payments. For many groups, the real issue is no longer whether approval is theoretically available, but whether the underlying transfer pricing support is strong enough when the bank asks the questions.
Broader context
This development should also be seen against a wider policy backdrop. National Treasury and the SARB published the draft Capital Flow Management Regulations, 2026 for public comment on 17 April 2026. Those draft Regulations are intended to replace the Exchange Control Regulations, 1961 in due course. For now, however, they remain proposals only. Until any new regime is formally introduced, the 1961 Regulations and the existing Authorised Dealer manuals, circulars and exemptions continue to apply.