As of 1 March 2015, any interest paid by a South African resident to or for the benefit of a foreign person may be subject to withholding tax on interest (WTI) at a rate of 15%.  As with dividend withholding tax, the foreigner receiving the interest payment would be liable for the tax, but it must be withheld by the person making the interest payment to or for the benefit of the foreigner.  WTI can only be paid to SARS electronically via eFiling. A Withholding Tax on Interest Declaration Form needs to be completed and submitted to SARS before the end of the month after the month in which the interest was paid, calculating the interest payment. Please note that the 15% withholding tax might be reduced or exempt depending on whether the country receiving the interest payment has a Double Tax Agreement (DTA) with SARS that reduce or exempt this.  The reduced rates or exemptions under a DTA don’t automatically apply and require the Withholding Tax on Interest Declaration Form to be submitted by the South African resident prior to payment of the interest. Herewith an example of the exemptions or reductions that have been provided under the relevant DTA:

  • Australia 10%
  • France 0%
  • Germany 10%
  • Ireland 0%
  • Nigeria 7.5%
  • Netherlands 0%
  • Switzerland 5%
  • Tanzania 10%
  • United Kingdom 0%
  • United States of America 0%

Accordingly, it is important that the Withholding Tax on Interest Declaration Form is completed prior to any interest payments taking place. In its absence, the 15% withholding tax would apply.  Please note that taxpayers are now required to submit an annual tax form IT3(b) to SARS as an reconciliation of all the interest payments.   Should you require any assistance with the completion of the Withholding Tax on Interest Declaration Form, the IT3(b) or require any other withholding tax on interest related advice, please feel free to contact us. We are also able to assist with the restructuring of your business to ensure that you make use of the more beneficial DTAs should this be required.