Tax amendment for non-residents

The amendments‚ effective from July next year‚ will apply to any interest that accrues‚ is received‚ becomes payable or is deemed to have accrued on or after this date‚ Treasury said in a statement on Tuesday (11 December).

Currently‚ SA's system provides for a blanket tax exemption on interest payable to foreign residents with two exceptions - foreign residents who conduct business in SA through a permanent establishment such as a foreign company or an individual operating through a branch‚ office‚ factory‚ workshop‚ mine or similar. The exemption does not apply to foreign residents that are physically based in SA for more than 183 days during the relevant year of assessment.

This means that bonds issued to a foreign person will be exempt from normal income tax in SA‚ unless the individual bond holder falls in these categories.

With effect from July the SA government will introduce a withholding tax on interest at a rate of 15%.

The withholding tax will apply to all interest paid by SA residents to foreign residents except if subject to normal tax.

Withholding tax exemptions will apply to interest paid to or accrued by foreign residents from bonds issued by any sphere of government. It will also apply to bonds listed on the JSE and to any debt owed by a domestic bank, the South African Reserve Bank, the Development Bank of Southern Africa and the Industrial Development Corporation.

The Treasury says the tax will apply to any domestic dealer and brokerage accounts and domestic investment schemes.