ch21.5 withholding tax on interest
Monday, 27 May 2024 12:44
for the A2: ch21.5.2.1, ch21.5.2.2 & ch21.5.2.5
21.5.2. withholding taxes [SILKE p.888]
- withholding taxes are generally imposed on passive income that does not require the presence of the person in the country.
south africa imposes withholding taxes on the following sources of income of a non-resident:
• proceeds paid to non-resident sellers i.r.o. immovable property disposed of
• interest
- dividends paid by south african resident companies are subject to dividends tax & it is also withholding tax when dividends are
paid in cash
- remuneration paid to any employee, whether a resident, or non-resident, may be subject to employee's tax & this is another
form of withholding tax that serves as an advance payment of the employee's normal tax liability
21.5.2.1. common features of withholding taxes imposed i.r.o. payments to non-residents [SILKE p.889]
the amount of withholding tax is calc. by applying a rate to the gross amount of the transaction. no deductions are allowed from this
amount. this tax is imposed on income as opposed to the profit or gain realised on the transaction. the following table summarises
the rates & amounts to which the rate should be applied:
WHT regime application
interest ▪ interest paid to, or for the benefit of a non-resident from a source in south africa
▪ this refers to interest, other than interest arising on certain sale & leaseback transactions
▪ interest that is deemed to be a dividend, or is not considered to be interest for purposes of this tax & is not subject
to withholding tax
21.5.2.1. basic calculation of amount to be withheld [SILKE p.891]
the amount of withholding tax is calc. by applying a rate to the gross amount of the transaction. no deductions are allowed from this
amount. this tax is imposed on income as opposed to the profit or gain realised on the transaction. the following table summarises
the rates & amounts to which the rate should be applied:
WHT rate amount to
regime which rate is
applied
interest 15% - s50B(1) interest paid
▪ the rate may be reduced if the foreign person the interest is paid to has submitted as declaration from a south
to the person making the payment stating that a reduced rate should be applied submitted african source
before interest is paid
▪ from 01/07/2020, such a declaration will only be valid for 5 years from the date of the declaration
21.5.2.1. person responsible to withhold and pay tax to SARS [SILKE p.893]
the obligation to withhold the tax rests on te person who pays, or is liable to pay, the amount to the non-resident:
WHT regime person responsible to withhold/pay tax to SARS
interest the person who pays the interest subject to withholding tax must withhold the tax from the payment of the interest
this person can be a resident, or a non-resident
21.5.2.5. withholding tax on interest - s50A to s50H [SILKE p.897]
certain interest paid to foreign persons are exempt from both withholding tax & normal tax. these exemptions depend on the nature
of the lender, the borrower, or the specific type of interest. the amounts that are exempt are:
▫ interest paid to a foreign person
▫ interest paid to a foreign person i.r.o. listed debt instruments
▫ interest paid to a foreign person by another foreign person
from the slides
❖ s50B(1)(a): withholding tax on interest that is paid to, or for the benefit of a non-resident from a source in south africa
withholding tax @ 15%
❖ s50B(3): withholding tax on interest is a final tax, and not a repayment of normal tax
❖ s50C(1) & (2): non-resident is liable for the withholding of tax on interest & the withholding tax paid over to SARS by the
'payer' (the person paying south african source interest to a non-resident) is regarded as an amount paid i.r.o. the non-
resident's liability for withholding tax on interest
❖ s50E: the 'payer' must not withhold tax if the interest is exempt from withholding tax i.t.o. s50D, OR, if the non-resident is
exempt from the withholding tax on interest i.t.o. a withholding tax declaration
❖ s50F: withholding tax must be paid over to SARS by the 'payer', or the non-resident if the 'payer' did not withhold/pay the
withholding tax & the payment must be accompanied by a return
❖ interaction between ss50D(3), 10(1)(h) & 10(1)(i):
the foreign person meets on of the requirements from the foreign person does not meet the requirements from
s10(1)(h)(i), or s10(1)(h)(ii) s10(1)(h)(i), or s10(1)(h)(ii)
ch21.5.2 (1, 2, 5) Page 1
Monday, 27 May 2024 12:44
for the A2: ch21.5.2.1, ch21.5.2.2 & ch21.5.2.5
21.5.2. withholding taxes [SILKE p.888]
- withholding taxes are generally imposed on passive income that does not require the presence of the person in the country.
south africa imposes withholding taxes on the following sources of income of a non-resident:
• proceeds paid to non-resident sellers i.r.o. immovable property disposed of
• interest
- dividends paid by south african resident companies are subject to dividends tax & it is also withholding tax when dividends are
paid in cash
- remuneration paid to any employee, whether a resident, or non-resident, may be subject to employee's tax & this is another
form of withholding tax that serves as an advance payment of the employee's normal tax liability
21.5.2.1. common features of withholding taxes imposed i.r.o. payments to non-residents [SILKE p.889]
the amount of withholding tax is calc. by applying a rate to the gross amount of the transaction. no deductions are allowed from this
amount. this tax is imposed on income as opposed to the profit or gain realised on the transaction. the following table summarises
the rates & amounts to which the rate should be applied:
WHT regime application
interest ▪ interest paid to, or for the benefit of a non-resident from a source in south africa
▪ this refers to interest, other than interest arising on certain sale & leaseback transactions
▪ interest that is deemed to be a dividend, or is not considered to be interest for purposes of this tax & is not subject
to withholding tax
21.5.2.1. basic calculation of amount to be withheld [SILKE p.891]
the amount of withholding tax is calc. by applying a rate to the gross amount of the transaction. no deductions are allowed from this
amount. this tax is imposed on income as opposed to the profit or gain realised on the transaction. the following table summarises
the rates & amounts to which the rate should be applied:
WHT rate amount to
regime which rate is
applied
interest 15% - s50B(1) interest paid
▪ the rate may be reduced if the foreign person the interest is paid to has submitted as declaration from a south
to the person making the payment stating that a reduced rate should be applied submitted african source
before interest is paid
▪ from 01/07/2020, such a declaration will only be valid for 5 years from the date of the declaration
21.5.2.1. person responsible to withhold and pay tax to SARS [SILKE p.893]
the obligation to withhold the tax rests on te person who pays, or is liable to pay, the amount to the non-resident:
WHT regime person responsible to withhold/pay tax to SARS
interest the person who pays the interest subject to withholding tax must withhold the tax from the payment of the interest
this person can be a resident, or a non-resident
21.5.2.5. withholding tax on interest - s50A to s50H [SILKE p.897]
certain interest paid to foreign persons are exempt from both withholding tax & normal tax. these exemptions depend on the nature
of the lender, the borrower, or the specific type of interest. the amounts that are exempt are:
▫ interest paid to a foreign person
▫ interest paid to a foreign person i.r.o. listed debt instruments
▫ interest paid to a foreign person by another foreign person
from the slides
❖ s50B(1)(a): withholding tax on interest that is paid to, or for the benefit of a non-resident from a source in south africa
withholding tax @ 15%
❖ s50B(3): withholding tax on interest is a final tax, and not a repayment of normal tax
❖ s50C(1) & (2): non-resident is liable for the withholding of tax on interest & the withholding tax paid over to SARS by the
'payer' (the person paying south african source interest to a non-resident) is regarded as an amount paid i.r.o. the non-
resident's liability for withholding tax on interest
❖ s50E: the 'payer' must not withhold tax if the interest is exempt from withholding tax i.t.o. s50D, OR, if the non-resident is
exempt from the withholding tax on interest i.t.o. a withholding tax declaration
❖ s50F: withholding tax must be paid over to SARS by the 'payer', or the non-resident if the 'payer' did not withhold/pay the
withholding tax & the payment must be accompanied by a return
❖ interaction between ss50D(3), 10(1)(h) & 10(1)(i):
the foreign person meets on of the requirements from the foreign person does not meet the requirements from
s10(1)(h)(i), or s10(1)(h)(ii) s10(1)(h)(i), or s10(1)(h)(ii)
ch21.5.2 (1, 2, 5) Page 1
