Tax and SARS knowledge base
How do I pay withholding tax on interest to SARS?
How must a South African payer withhold and pay tax on interest paid to a non-resident?
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Direct answer
If South African-source interest is paid to or for a foreign person, the payer generally has to withhold withholding tax on interest (WTI). The domestic rate is 15%, but an exemption or a lower tax-treaty rate may apply. The payer must establish the recipient's status and obtain the required declaration before relying on relief.
The payer submits the WT002 return and pays SARS electronically through eFiling by the end of the month following the month in which the interest was paid. If that date falls on a weekend or public holiday, SARS requires payment on the last business day before it. WTI is normally a final tax for the foreign recipient.
What this means in practice
Do not treat every offshore interest payment as automatically taxable at 15%, or automatically exempt. First identify the legal recipient, the source of the interest and the date it was paid. Then test the statutory exemptions and any applicable double-tax agreement.
A treaty rate is not a guess based on an address. The beneficial owner must meet the treaty conditions and provide the prescribed declaration. If the paperwork is late or incomplete, get advice before applying relief retrospectively.
Step-by-step
- Identify the interest payment, recipient, payment date and underlying debt.
- Confirm whether the interest is from a South African source and whether the recipient is a foreign person.
- Test the Income Tax Act exemptions and any relevant treaty article.
- Obtain and retain the recipient's declaration and supporting residence information before applying an exemption or reduced rate.
- Calculate WTI on the gross interest at the correct rate and withhold it when the interest is paid.
- Submit WT002 and pay through SARS eFiling by the applicable deadline.
- Include the payment in the annual WTI reconciliation and issue the required IT3(b) information to the foreign recipient.
Documents and records to keep
- Loan agreement, interest calculation and proof of payment.
- Recipient identity, address, tax residence and beneficial-ownership evidence.
- Declaration supporting an exemption or treaty rate.
- Treaty analysis or written tax advice where the position is not straightforward.
- WT002 submission, SARS payment confirmation, reconciliation and IT3(b) record.
Important limits and exceptions
The source rules, exemptions and treaty tests are fact-specific. Government and certain bank or listed-debt interest may receive different treatment. A recipient can also change residence or beneficial ownership during an arrangement. Recheck long-running agreements instead of carrying an old rate forward indefinitely.
This guide does not cover dividends tax, royalties withholding tax or interest paid to a South African resident.
When to get tailored advice
Get advice before the payment if the recipient is related to the payer, a transparent entity, a trust, or resident in a treaty country, or if the debt was assigned. Early advice is usually easier than correcting a return after the money has left South Africa.