How to qualify for a WTI discount
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The standard rate of 15% can be reduced if the foreign person, in your double taxation agreement, can prove, via a declaration, that the interest is lower in the country where the foreign person is.
So, for example, let's say a UK company lends money to a South African company to help it expand and charges a market-related interest rate. The South African company would be required to deduct WTI at 15% here. But the UK company sends a declaration stating that, as a result of their double taxation agreement, it should be 0%. And so once it's received, the South African company won't have to withhold any taxes.
You must have a valid Double Taxation Agreement in force between South Africa and the country where the foreign person is specifically a taxpayer.
Also, keep in mind that the declaration must clearly state that should the rate in the foreign country change for any reason, he will let you know.
*To learn more on WTI, page over to Chapter W 03: Withholding tax on interest
in your Practical Tax Loose Leaf Service
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