Qualify for a discount on 'Withholding Tax on Interest' with this simple step
Just over one year ago, SARS introduced Withholding Tax on Interest (WTI).
It's a tax charged on the interest paid by you to any foreign person (you withhold it and then pay to over to SARS).
The reason SARS does this is so they can hold you liable for the taxes, instead of having to chase foreign nationals, in other countries, for taxes owing to them.
Now, the general understanding is that WTI is calculated at 15% of the interest paid or payable. But if you have a double taxation agreement in place, then you could qualify for a discount!
Keep reading to find out how...
How to qualify for a WTI discount
Ever wished for a quick reference guide on complicated tax matters? Here is the answer to your prayers.
99 Tax Tips covers topical, everyday questions on personal and business taxes in easy-to-read English. Often- complicated tax concepts have been transformed into practical, extremely useful information.
See how to legally minimise your taxes; learn how to conduct yourself during a SARS audit.
Make 99 Tax Tips your constant companion to make the most of your tax affairs and stay compliant
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
Alternatively, click here
to order your copy today.