The South African Revenue Service has issued guidance clarifying the application of withholding tax provisions applicable to interest and royalties in two interpretation notes dated April 23.
The note on interest interprets Income Tax Act sections 50A to 50H relating to the withholding tax on interest. Withholding tax on interest, which became effective on March 1, 2015, applies to interest paid from a South African source to or for the benefit of a foreign person. It is a final tax with a 15 percent rate, which may be reduced under a treaty.
The note explains the requirements for when to withhold tax on interest and the computation of the tax. It defines key terms, including “foreign person,” “interest,” and “bank.” It also describes exemptions from the withholding tax and includes examples throughout.
The note on royalties interprets Income Tax Act sections 49A to 49H relating to withholding tax on royalties. The withholding tax on royalties is a final tax with a 15 percent rate that applies to certain royalties from a source within South Africa paid to a foreign person.
The royalty note explains the liability to withhold tax, applicable exemptions, reductions to the rate, and required declarations. It also defines key terms like “foreign person” and “royalty” and includes various examples demonstrating these rules.
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