Withholding tax on interest paid to non-residents

By Graeme Saggers, Nolands

The introduction of a withholding tax on interest paid to non-residents in South Africa was first announced in 2012. Since then it has seen a number of delays as legislation and systems have been refined. However, it finally came into official effect on 1 March 2015. The withholding tax is applied to all interest to foreign residents (excluding those with permanent establishments in South Africa or who are present in South Africa for more than 183 days in a year) which was or is paid or became due and payable after 1 March 2015.

Consequently, any interest that was accrued prior to 1 March 2015 but was only paid after that date will incur the tax which is a final tax. The tax does not apply to interest paid by government bonds, banks, listed debt and headquarter companies. The phrase “due and payable” has not been defined and there is strong persuasive judicial precedent which indicates that an amount will only become due and payable at the time at which payment of the amount is stipulated by the parties. Interest accrued on loans will therefore only incur the tax when it is either physically paid or is called upon by the creditor. Following on from this new withholding tax, South Africa intends to introduce a withholding tax on service fees from 1 January 2016, meaning taxes on dividends, royalties, interest and service fees will be taxed at 15% prior to the effect of any double taxation agreements.

Graeme Saggers
Nolands SA, Mowbray, Cape Town, South Africa
T: +27 21 658 6600
E: This email address is being protected from spambots. You need JavaScript enabled to view it.; W: www.nolands.co.za

Nolands SA is a national auditing firm, located in ten offices in all major centres in South Africa and Mauritius, employing almost 200 people focused on providing the best possible solutions for its clients. Nolands prides itself on being “not ordinary” and in its ability to integrate services and respond rapidly to clients’ needs.

Graeme is a Director of Nolands and he heads up the tax division. Graeme gained a Bachelor of Commerce and Honours in Accounting at Rhodes University and, after qualifying as a Chartered Accountant (South Africa), he joined Nolands.

published: April 2015