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South Africa: Relief from withholding tax; proposal for changes

South Africa: Relief from withholding tax

A proposal—Tax Administration Laws Amendment Bill, 2019—would require taxpayers to pay more withholding tax if they fail to renew their declarations and undertakings every five years.

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Background

Payments of dividends, royalties, and interest to certain recipients (for instance, non-residents of South Africa) are subject to withholding tax. This requires the payor to withhold a prescribed portion from these amounts and to remit this portion to the South African Revenue Service. In certain instances, it is possible to reduce or eliminate this withholding tax when, for example, a treaty granting relief from withholding taxes exists between South Africa and the country where the recipient is a resident.

In order to take advantage of such tax relief, it is necessary prior to the first payment of the dividend, interest or royalty for the recipient to supply the payor with a declaration setting out the reasons why tax relief is claimed. Recipients of dividends are also required to provide an undertaking to inform the payor if the recipient’s circumstances change. Currently, these declarations and undertakings only have to be provided once and remain valid without time limitation.

Proposal to require renewal every five years

The bill proposes that as of 1 July 2020, such documents would only be valid for a five-year period after which the declarations would expire and would have to be renewed in order for relief from the withholding to be claimed. 

Under the proposal, regulated intermediaries (such as collective investment schemes) that make royalty, interest, and/or dividend payments but apply anti-money laundering “know your client” or common reporting standard (CRS) rules in relation to documents they keep would not be subject to this time limitation.


Read an October 2019 report [PDF 103 KB] prepared by the KPMG member firm in South Africa

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