South Africa applies withholdings taxes (“WHT”) on royalties from a source within South Africa paid by any person, resident or not, to a foreign person, as well as on interest from a source within South Africa and also dividends.
All these WHT’s can potentially be reduced or eliminated by the application of a double taxation treaty (“DTA”).
In relation to the WHT on interest, section 50E(2)(b) of the South African Income Tax Act makes provision that a person must not withhold, at the prescribed rate, an amount of interest if the foreign person receiving interest has submitted a declaration that the amount is exempt from WHT on interest because of an applicable DTA.
This requirement did not exist in the legislation with respect to WHT on royalties and dividends tax, although the Act does provide for a reduced WHT rate because of the application of a DTA.
The Taxation Laws Amendment Act 2021, Act 20 0f 2021 has now been amended to require such a declaration for both royalties and dividends tax, and is included in Sections 49E(2)(b), 64G(2)(a) and 64H(2)(a) of the Income Tax Act.