What is Code 3807 on a South African Payslip?
Employer loan and interest subsidy fringe benefits explained — how the SARS official interest rate works, when a benefit arises, the worked example, and IRP5 reporting.
3807Code 3807 is a loan or interest subsidy fringe benefit. When your employer lends you money at no interest or below the SARS official rate (currently 9.25%), the interest saving is a taxable fringe benefit. The taxable value is the difference between the official rate and the rate you actually pay, applied to the outstanding loan balance each month.
What Code 3807 Means
Code 3807 covers loan and interest subsidy fringe benefits. When an employer provides financial assistance to an employee — either as a direct loan at no or low interest, or by subsidising interest on an external loan such as a home bond — the financial saving is treated as a taxable benefit under the Seventh Schedule of the Income Tax Act.
The principle is straightforward: if you borrowed the same amount from a bank, you would pay the market rate of interest. By lending below the SARS official rate, your employer is effectively giving you a financial advantage that SARS treats as additional income. The taxable fringe benefit is the difference between what you would have paid at the official rate and what you actually paid.
Common situations where code 3807 arises include: interest-free staff loans for personal expenses, emergency loans offered as an employee benefit, below-market-rate housing loans offered to senior staff, and employer contributions toward an employee's home loan interest (bond subsidies).
How the Fringe Benefit Is Calculated
| Item | Example A (Interest-free loan) | Example B (Below-rate loan) |
|---|---|---|
| Loan amount outstanding | R50,000 | R50,000 |
| SARS official rate (p.a.) | 9.25% | 9.25% |
| Rate charged by employer | 0% | 5% |
| Rate shortfall | 9.25% | 4.25% |
| Annual taxable fringe benefit | R4,625 | R2,125 |
| Monthly taxable value (code 3807) | R385/month | R177/month |
Because the official rate is tied to the SARB repo rate, your code 3807 fringe benefit value changes whenever the Monetary Policy Committee adjusts rates. A rate cut reduces the official rate, which reduces your fringe benefit. A rate hike increases it. Your employer should update the fringe benefit calculation after each MPC announcement — if your payslip does not reflect a rate change, raise it with your payroll department.
Frequently Asked Questions
What does code 3807 mean on my payslip?
Code 3807 is a loan or interest subsidy fringe benefit. When your employer lends you money at no interest or at a rate below the SARS official interest rate, the interest you save is deemed to be a taxable fringe benefit. The taxable value equals the difference between the official rate and the rate you pay, multiplied by the outstanding loan balance each month. PAYE is deducted on this deemed interest saving.
What is the SARS official interest rate for loan fringe benefits?
The SARS official rate of interest is the South African Reserve Bank repurchase rate plus 1 percentage point. As at June 2026, with the SARB repo rate at 8.25%, the official rate is 9.25% per annum. This rate changes whenever the SARB adjusts the repo rate — your employer must recalculate the fringe benefit value after each MPC announcement. Always verify the current official rate at sars.gov.za.
When does a loan from my employer create a taxable fringe benefit?
A taxable fringe benefit arises whenever an employer lends money to an employee at a rate below the SARS official rate. An interest-free loan creates the largest benefit — the full official rate applied to the balance is taxable. A below-official-rate loan creates a smaller benefit — only the shortfall is taxable. If the employer charges the official rate or above, no fringe benefit arises and code 3807 does not appear on your payslip.
How is the taxable value of an employer loan calculated?
Monthly taxable value = (Official Rate - Actual Rate) x Outstanding Balance / 12. For a R50,000 interest-free loan at an official rate of 9.25%: (9.25% - 0%) x R50,000 / 12 = R385.42/month. This amount is added to your taxable income and PAYE is deducted at your marginal rate. As you repay the loan, the outstanding balance falls and the monthly fringe benefit value decreases proportionally.
Does an employer housing bond subsidy create a code 3807 fringe benefit?
Yes. If your employer subsidises your home loan by paying a portion of your mortgage interest — for example, paying the difference between your bond rate and a lower preferential rate — the subsidy value is a taxable fringe benefit under code 3807. The taxable value is the rand amount of the interest subsidy received. This is distinct from employer-provided accommodation (code 3805), which covers situations where the employer owns the property.
Does code 3807 appear on my IRP5?
Yes — the annual total taxable value of the loan or subsidy fringe benefit appears as code 3807 on your IRP5 and is included in your gross income. PAYE was deducted monthly on the deemed interest benefit. Note that the loan itself is not income — only the interest saving is the fringe benefit. The principal you borrowed and repay has no tax implications beyond the interest fringe benefit.