Original Research

Withholding tax on interest: Who has the withholding obligation?

Marina Bornman, Charl Horn, Lizanne Barnard
Journal of Economic and Financial Sciences | Vol 12, No 1 | a473 | DOI: https://doi.org/10.4102/jef.v12i1.473 | © 2019 Marina Bornman, Charl Horn, Lizanne Barnard | This work is licensed under CC Attribution 4.0
Submitted: 04 April 2019 | Published: 29 October 2019

About the author(s)

Marina Bornman, Department of Accountancy, University of Johannesburg, Johannesburg, South Africa
Charl Horn, Department of Accountancy, University of Johannesburg, Johannesburg, South Africa
Lizanne Barnard, Department of Accountancy, University of Johannesburg, Johannesburg, South Africa


Orientation: Non-residents receiving interest from a South African source will be taxable in terms of the gross income definition in the South African Income Tax Act. Effective 01 March 2015, new provisions for withholding of tax on interest (WTI) to non-residents were incorporated in the Act with the purpose of simplifying the collection of tax from non-residents.

Research purpose: This article aimed to seek clarity on who ‘the person is who makes payment’ of the interest in order to suggest an amendment to the Act.

Motivation for the study: When dealing with debt instruments, the issuer of the instrument and the ‘payer’ of the interest might not always be the same person as intermediaries might be involved in the transactions. The provisions on WTI do not clarify who has the withholding obligation in the case of an intermediary, and uncertainty may therefore arise on who the ‘payer’ of the interest is.

Research approach/design and method: Using a doctrinal method, the article reviewed and interpreted South African legislation and commentary related to the topic and also turned to international legislation dealing with WTI for guidance.

Main findings: It was found that the only person who would be in a position to withhold the withholding tax is the person who is seen as the last client-facing entity or intermediary.

Practical/managerial implications: Two suggestions are offered with regard to amending the provisions on WTI, namely to split the withholding obligation between the issuer and the intermediary and to define ‘intermediary’.

Contribution/value-add: This study provides clarity on ‘who the payer of the interest’ is on whom the withholding obligation rests.


withholding tax; interest; non-resident; dividends tax; regulatory intermediary


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