With effect from 1 March 2015, where a South African resident is required to make a payment of interest to a non-resident, there is an obligation for the payer of the interest to withhold a portion of that interest as withholding tax, and pay it over to the South African Revenue Service.

The tax is known as withholding tax on interest or 'WTI'.

This is a final tax that can be levied at a rate of 15%. The tax is calculated on the amount of interest paid or interest that has become due and payable to the non-resident.

Does WTI apply to you?

WTI is applicable to amounts of interest that are paid from a South African resident to a non-resident on or after 1 March 2015.  This may include interest on foreign loans or trade creditors.

Interest is deemed to be paid on the earlier of the date on which the interest is paid or becomes due and payable.

Could you be exempt from WTI?

In the amount of interest is paid to any non-residents from the following sources, it will be exempt from WTI:

• the government of SA, in the national, provisional or local sphere OR
• any bank, the South African Reserve Bank, the Development Bank or Southern Africa or the Industrial Development Corporation OR
• a headquarter company in respect of the granting of financial assistance  in respect of international transactions to be based on arms-length principles (transfer pricing) OR
• listed debt

If the non-resident is an individual, the non-resident will also be exempt from the WTI if they are physically present in South Africa for a period exceeding 183 days in aggregate during the 12-month period preceding the date on which the interest is paid.

If the non-resident is a company or trust, the non-resident will be exempt from the WTI where the debt claim in respect of which the interest is paid is effectively connected to a permanent establishment of the non-resident in South Africa which is a registered taxpayer in South Africa.
In the above instances, the interest may be subject to normal tax in South Africa.

Responsibilities of the payer

Any person that withholds any WTI must submit the required return and pay the tax to SARS by the last day of the month following the month during which the interest is paid.

Can there be a reduction in WTI?

In some instances, a Double Taxation Agreement (DTA) between South Africa and the country of residents of the non-resident, will provide for a reduced WTI rate.