Category: PART IVB – Withholding tax on interest (ITA)

Section 50H (ITA) – Currency of payments made to Commissioner

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50H.    Currency of payments made to Commissioner

If an amount withheld by a person in terms of section 50E(1) is denominated in any currency other than the currency of the Republic, the amount so withheld must, for the purposes of determining the amount to be paid to the Commissioner in terms of section 50F(2), be translated to the currency of the Republic at the spot rate on the date on which the amount was so withheld.

[Part IVB inserted by section 98 of Act 31 of 2013 effective on 1 March 2015 – comes into operation in terms of section 98 of Act 31 of 2013, substituted by section 125 of Act 43 of 2014]

51.    ……….

Section 50G (ITA) – Refund of withholding tax on interest

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50G.    Refund of withholding tax on interest

(1)     Notwithstanding Chapter 13 of the Tax Administration Act, if-

(a)     an amount is withheld from a payment of an amount of interest as contemplated in section 50E(1);


(b)     a declaration contemplated in section 50E(2)(b) or (3) in respect of that interest is not submitted to the person paying that interest by the date of the payment of that interest; and


(c)     a declaration contemplated in section 50E(2)(b) or (3) is submitted to the Commissioner within three years after the payment of the interest in respect of which the declaration is made,


so much of that amount as would not have been withheld had that declaration been submitted by the date contemplated in the relevant subsection is refundable by the Commissioner to the person to which the interest was paid.

(2)     Notwithstanding Chapter 13 of the Tax Administration Act, if-

(a)     an amount of withholding tax on interest is paid as contemplated in section 50E(1) in respect of an amount of interest that became due and payable; and


(b)     the amount of interest subsequently becomes irrecoverable, so much of that amount as would not have been paid had the interest not become due and payable is refundable by the Commissioner to the person who paid the tax.

[Section 50G substituted by section 59 of Act 15 of 2016 effective on 1 March 2015]

Section 50F (ITA) – Payment and recovery of tax

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50F.     Payment and recovery of tax

(1)     If, in terms of section 50C, a foreign person is liable for any amount of withholding tax on interest in respect of any amount of interest that is paid to or for the benefit of the foreign person, that foreign person must pay that amount of withholding tax and submit a return by the last day of  the month following the month during which the interest is paid, unless the tax has been paid by any other person.

[Subsection (1) substituted by section 58 of Act 15 of 2016 effective on 1 March 2015]

(2)     Any person that withholds any withholding tax on interest in terms of section 50E must submit a return and pay the tax to the Commissioner by the last day of the month following the month during which the interest is paid.

 

(3)     Any person that pays withholding tax on interest in terms of section 50E in respect of interest due and payable but not actually paid, must submit a return by the last day of the month following the month during which the interest became due and payable.

[Subsection (3) added by section 58 of Act 15 of 2016 effective on 1 March 2015]

Section 50E (ITA) – Withholding of withholding tax on interest by payers of interest

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50E.    Withholding of withholding tax on interest by payers of interest

(1)     Subject to subsections (2) and (3), any person who makes payment of any amount of interest to or for the benefit of a foreign person must withhold an amount of withholding tax on interest calculated at the rate contemplated in section 50B(1) from that payment.

[Subsection (1) substituted by section 65 of Act 43 of 2014 effective on 1 March 2015 – comes into operation in terms of section 65 of Act 43 of 2014, substituted by section 154 of Act 25 of 2015)]

(2)     A person must not withhold any amount from any payment contemplated in subsection (1) –

(a)     to the extent that the interest is exempt from the withholding tax on interest in terms of section 50D(1); or

 

(b)     if the foreign person to or for the benefit of which that payment is to be made has, before the interest is paid, submitted to the person making the payment-

(i)      a declaration in such form as may be prescribed by the Commissioner that the foreign person is, in terms of section 50D(3) or an agreement for the avoidance of double taxation, exempt from the withholding tax on interest in respect of that payment; and

(ii)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the person making the payment in writing, should the circumstances affecting the exemption referred to in subparagraph (i) change or should the payment of the interest no longer be for the benefit of that foreign person.

[Paragraph (b) amended by section 57 of Act 15 of 2016 and substituted by section 4(1)(a) of Act 33 of 2019]

(3)     The rate referred to in subsection (1) must, for the purposes of that subsection, be reduced if the foreign person to or for the benefit of which the payment contemplated in that subsection is to be made has, before the interest is paid, submitted to the person making the payment-

(a)     a declaration in such form as may be prescribed by the Commissioner that the interest is subject to that reduced rate of tax as a result of the application of an agreement for the avoidance of double taxation; and

(b)     a written undertaking in such form as may be prescribed by the Commissioner to forthwith inform the person making the payment in writing, should the circumstances affecting the application of the agreement referred to in paragraph (a) change or should the payment of the interest no longer be for the benefit of that foreign person.

[Subsection (3) amended by section 57 of Act 15 of 2016 and substituted by section 4(1)(b) of Act 33 of 2019]

(4)     A declaration and written undertaking submitted in terms of subsection (2)(b) or (3) are no longer valid after a period of five years from the date of the declaration, unless the person making the payment is subject to the provisions of-

(a)     the Financial Intelligence Centre Act, 2001 (Act 38 of 2001);

(b)     the Agreement Between the Government of the Republic of South Africa and the Government of the United States of America to improve International Tax Compliance and to Implement the US Foreign Account Tax Compliance Act; or

(c)     the regulations for purposes of paragraph (a) of the definition of “international tax standard” in section 1 of the Tax Administration Act,

with regard to the foreign person to or for the benefit of which the payment is to be made and takes account of these provisions in monitoring the continued validity of the declaration.

[Subsection (4) added by section 4(1)(c) of Act 33 of 2019 effective on 1 July, 2020]

Section 50D (ITA) – Exemption from withholding tax on interest

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50D.    Exemption from withholding tax on interest

 

(1)     Subject to subsection (2), there must be exempt from the withholding tax on interest any amount of interest –

 

(a)     if that amount of interest is paid to any foreign person –

 

(i)      by –

 

(aa)   the government of the Republic in the national, provincial or local sphere;

 

(bb)   any bank, the South African Reserve Bank, the Development Bank of Southern Africa or the Industrial Development Corporation; or

 

(cc)    a headquarter company in respect of the granting of financial assistance as defined in section 31(1) to which section 31 does not apply as a result of the exclusion contained in section 31(5)(a);or

[Item (cc) substituted by section 71 of Act 25 of 2015 effective on 1 March 2015]

 

(ii)     in respect of any listed debt;

[Item (ii) amended by section 71 of Act 25 of 2015 effective on 1 March 2015]

 

(b)     payable as contemplated in section 21(6) of the Financial Markets Act to any foreign person that is a client as defined in section 1 of that Act;

[Paragraph (b) amended by section 71 of Act 25 of 2015 and section 56 of Act 15 of 2016 effective on 1 March 2015, applies in respect of interest that is paid or becomes due and payable on or after that date]

 

(c)     paid to a foreign person in respect of a debt owed by another foreign person unless-

 

(i)      the other foreign person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve month period preceding the date on which the interest is paid; or

 

(ii)     the debt claim in respect of which that interest is paid is effectively connected with a permanent establishment of that other foreign person in the Republic if that other foreign person is registered as a taxpayer in terms of Chapter 3 of the Tax Administration Act;

[Subparagraph (ii) amended by section 59 of Act 23 of 2018 effective on 17 January 2019]

[Paragraph (c) added by section 71 of Act 25 of 2015 and amended by section 56 of Act 15 of 2016 effective on 1 March 2015, applies in respect of interest that is paid or becomes due and payable on or after that date]

 

(d)     if that amount of interest is paid to-

 

(i)      the African Development Bank established on 10 September 1964;

 

(ii)     the World Bank established on 27 December 1945 including the International Bank for Reconstruction and Development and International Development Association;

 

(iii)    the International Monetary Fund established on 27 December 1945;

 

(iv)    the African Import and Export Bank established on 8 May 1993;

 

(v)     the European Investment Bank established on 1 January 1958 under the Treaty of Rome; or

 

(vi)     the New Development Bank established on 15 July 2014;

[Subparagraph (vi) substituted by section 39(1)(a) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of interest that is received by or accrues to a trust that is resident on or after that date]

[Paragraph (d) added by section 56 of Act 15 of 2016 effective on 1 March 2015, applies in respect of interest that is paid or becomes due and payable on or after that date]

 

(e)     included in the income of a resident as is attributable to a donation, settlement or other disposition made by a resident as contemplated in section 7(8)(a); or

[Paragraph (e) added by section 59 of Act 23 of 2018 and substituted by section 39(1)(b) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of interest that is received by or accrues to a trust that is resident on or after that date]

 

(f)      that is received by or accrued to a trust that is a resident and is then paid to a beneficiary of that trust as a distribution by that trust.

[Paragraph (f) added by section 39(1)(c) of Act 17 of 2023 with effect 1 March, 2024 and applicable in respect of interest that is received by or accrues to a trust that is resident on or after that date]

 

 

(2)     Interest paid to a foreign person in respect of any amount advanced by the foreign person to a bank is not exempt from the withholding tax on interest if the amount is advanced in the course of any arrangement, transaction, operation or scheme to which the foreign person and any other person are parties and in terms of which the bank advances any amount to that other person on the strength of the amount advanced by the foreign person to the bank.

 

(3)       A foreign person is exempt from the withholding tax on interest if-

 

(a)     that foreign person is a natural person who was physically present in the Republic for a period exceeding 183 days in aggregate during the twelve-month period preceding the date on which the interest is paid; or

 

(b)     the debt claim in respect of which that interest is paid is effectively connected with a permanent establishment of that foreign person in the Republic if that foreign person is registered as a taxpayer in terms of Chapter 3 of the Tax Administration Act.

Section 50C (ITA) – Liability for tax

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50C.    Liability for tax

 

(1)     A foreign person to which an amount of interest is paid is liable for the withholding tax on interest to the extent that the interest is regarded as having been received by or accrued to that foreign person from a source within the Republic in terms of section 9(2)(b).

 

(2)    Where any amount of withholding tax on interest is –

 

(a)     withheld as contemplated in section 50E(1); and

(b)     paid as contemplated in section 50F(2),

that amount of withholding tax on interest must be regarded as an amount that is paid in respect of that foreign person’s liability under subsection (1).

Section 50B (ITA) – Levy of withholding tax on interest

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50B.    Levy of withholding tax on interest

(1)

(a)     There must be levied for the benefit of the National Revenue Fund a tax, to be known as the withholding tax on interest, calculated-

(i)      at the rate of 15 per cent; or

(ii)     at such rate as the Minister may announce in the national annual budget contemplated in section 27(1) of the Public Finance Management Act, with effect from a date mentioned in that Announcement,

of the amount of any interest that is paid by any person to or for the benefit of any foreign person to the extent that the amount is regarded as having been received by or accrued to that foreign person from a source within the Republic in terms of section 9(2)(b).

(b)     If the Minister makes an announcement contemplated in paragraph (a)(ii), that rate comes into effect on the date determined by the Minister in that announcement and continues to apply for a period of 12 months from that date subject to Parliament passing legislation giving effect to that announcement within that period of 12 months.

[Subsection (1) substituted by section 58 of Act 17 of 2017 effective on 18 December 2017]

(2)     For the purposes of this Part, interest is deemed to be paid on the earlier of the date on which the interest is paid or becomes due and payable.

(3)     The withholding tax on interest is a final tax.

(4)     Where a person making payment of any amount of interest to or for the benefit of a foreign person has withheld an amount as contemplated in section 50E(1), that person must, for the purposes of this Part, be deemed to have paid the amount so withheld to that foreign person.

“Interest” definition of section 50A of ITA

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“interest” means interest as contemplated in paragraph (a) or (b) of the definition of “interest” in section 24J(1), but does not include an amount of interest that is deemed to be a dividend in specie in terms of section 8F(2) or 8FA(2);

[Definition of “interest” inserted by section 70(1) of Act 25 of 2015 and substituted by section 31(1)(b) of Act 20 of 2021 effective on 1 January, 2022 and applicable in respect of amounts paid on or after that date]