South Africa

Payments to residents

The only payments to residents that are subject to WHT are in respect of dividends, although dividend distributions to South African resident companies are exempt from dividends tax.

Base Erosion and Profit Shifting (BEPS) Multilateral Instrument (MLI)

South Africa ratified the BEPS MLI in September 2022. 

The MLI entered into force for South Africa on 1 January 2023 and applies to South Africa’s 'Covered Tax Agreements' that are affected:

• in respect of WHTs, from 1 January 2023, and
• in relation to other taxes, for tax years starting on or after 1 July 2023.

There are slightly different effective dates for the modifications in respect of dispute resolution.

Royalties payable to non-residents

Royalties and know-how payments made to non-residents for the use of or right to use IP rights in South Africa are deemed to be from an SA source. The payer of the royalty or know-how payment is obligated to deduct a WHT of 15% of this payment, which is a final tax payable by the recipient of such income.

Dividends payable to non-residents

A dividend WHT of 20% applies to any dividend paid by a resident company to a non-resident or by a non-resident company to a non-resident where the shares in respect of which the dividends are paid are listed on a South African exchange. The tax is imposed on the beneficial owner of the dividend and not on the company, with the exception of in specie dividends. The payer of the dividend or regulated intermediary is required to deduct the 20% WHT from the payment. 

Interest payable to non-residents

A 15% WHT on interest applies to interest payable from an SA source to non-residents on certain debt instruments. The resident payer of the interest is required to deduct the 15% WHT from the payment.

Service fees payable to non-residents

No domestic WHT is levied on fees payable to non-residents.

Treaty rates for dividends, interest, and royalties

The WHT may be reduced by the terms of the relevant tax treaty, as shown below.

Note that the treaty rate is the maximum allowable rate to be charged by the treaty countries; where this rate is higher than the domestic tax rate, the latter will apply.

Notes

'D' refers to direct capital holding.

1. Recipient is the beneficial owner of the royalty.
2. Royalty is subject to tax in recipient country.
3. 15% is levied on royalties for cinematographic or television films.
4. The maximum rate for copyright royalties, royalties for use of computer software, and patents concerning industrial, commercial, and scientific experience is 6% of the royalties paid; otherwise, 10%.
5. Maximum rate of 10% on royalty of the adjusted amount (being 70% of the gross royalties) for use of industrial, commercial, or scientific equipment.
6. The 5% rate applies to royalties for the use of a copyright. A 7% rate applies to royalties for the use of patents, trademarks, designs, models, etc.
7. In respect of right to use industrial, commercial, or scientific equipment and transport vehicles, a 10% rate applies.
8. The lower rate of 5% applies to any cultural dramatic musical, or other artistic work (but not including royalties in respect of motion picture films), as well as industrial, commercial, or scientific works. The rate of 10% applies in all other cases.
9. The 5% lower rate applies to use of copyright in literary, artistic, and scientific works. The 7% lower rate applies to right of use of patents, trademarks, designs, models, secret formula/process, the use of industrial, commercial, or scientific equipment, or for information concerning industrial, commercial, or scientific experience.
10. No right to tax dividends in payor state if the beneficial owner of the dividend is resident in the payee state.
11. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 25% of capital, and the higher rate applies in other cases.
12. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 10% of capital, and the higher rate applies in other cases.
13. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 25% of voting shares, and the higher rate applies in other cases.
14. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 25% of capital and a minimum 12-month holding period prior to the end of the accounting period prior to the dividend payment, and the higher rate applies in other cases.
15. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 25% of voting shares and a minimum six-month holding period prior to the end of the accounting period prior to the dividend payment, and the higher rate applies in other cases.
16. SA resident payor to Maltese resident beneficial owner (Maltese resident payor to SA resident beneficial owner is limited to tax on profits).
17. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 25% of capital and a minimum two-year uninterrupted holding period prior to the dividend payment, and the higher rate applies in other cases.
18. Lower rate applies to a beneficial owner who has a minimum holding of 30% of capital and a minimum direct investment of 100,000 United States dollars (USD) in the company declaring the dividend, and the higher rate applies in other cases.
19. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 10% of capital, and the higher rate applies in other cases. However, a 'most favoured nations' clause applies, which will limit the above rates to the lowest treaty rate in terms of any other treaty.
20. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 20% of capital, and the higher rate applies in other cases.
21. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 15% of capital, and the higher rate applies in other cases.
22. Lower rate of 5% applies to a beneficial owner that is a company and has a minimum holding of 10% of capital. Lower rate of 10% applies in all other cases. 15% rate applies to all dividends from property investment companies.
23. Lower rate applies to a beneficial owner that is a company and has a minimum holding of 10% of voting power (directly), and the higher rate applies in other cases. Specific rules apply to Regulated Investment Company or a Real Estate Investment Trust.
24. The treaty contains no provisions regarding dividends WHT, thus the domestic rate will apply.
25. The Netherlands Protocol has a 'most favoured nation' provision whereby the rate most favourable in any other treaty will apply over the default treaty rate. This, however, only applies to treaties concluded after this treaty.
26. No right to tax interest in payor state if the beneficial owner of the interest is resident in the payee state.
27. The 5% rate applies to interest derived by a bank or any other financial institution, and the 10% rate applies in other cases.
28. No right to tax interest in payor state if the beneficial owner of the interest is resident in the payee state and provided interest is taxable in that other state.
29. No specific provision is made for interest in the DTA.
30. The 10% rate applies to interest received by a financial institution (including an insurance company), and the 15% rate applies in other cases.
31. The 5% rate applies to interest on loans made by banks, and the 12% rate applies in other cases.
32. The 5% rate applies if the interest is paid to a bank; the 10% rate applies in other cases.
33. 5% if the beneficial owner of the dividend is a company that controls (directly/indirectly) a minimum of 10% of the voting power or directly holds at least 10% of the capital of the company paying the dividends, excluding non-resident-owned investment corporations resident in Canada. 15% of the dividends in all other cases.
34. In New Zealand, dividends are taxed at a flat rate of 15%.
35. No right to tax interest in payor state if the beneficial owner is the government of the other state or a government entity.
36. No specific provision is made for royalties in the DTA.
37. No right to tax interest on stocks and securities issued by any government other than South Africa, even if business is carried on in South Africa, if taxed in residence state.
38. Lower rates for royalties do not apply if attributable to a PE in the payor state or the right or property on which royalty is paid is attributable to PE in payor state.
39. The interest exemption in the source country is only retained for interest paid or received by a government or central bank, or for interest on debt instruments listed on a recognised stock exchange.
40. The interest exemption applies if the beneficial owner of the interest is the Hong Kong Special Administrative Region (HKSAR) Government, the Hong Kong Monetary Authority, the SA Government, the SA Reserve Bank, or institutions wholly or mainly owned by them.

Non-resident entertainers and sportspersons

A WHT at the rate of 15% applies to all payments made to non-resident entertainers and sports persons in respect of their activities exercised in South Africa.

Disposal of immovable property by non-residents

Any person who pays an amount to a non-resident in respect of the sale of immovable property in South Africa must withhold from the amount payable an amount equal to:

• 7.5% if the non-resident seller is an individual
• 10% if the non-resident seller is a company, or
• 15% if the non-resident seller is a trust.

No WHT is levied if the amount is less than ZAR 2 million.

The amount so withheld is not a final tax for the non-resident seller. Instead, this amount is regarded as an advance payment of the non-resident seller's normal tax liability for the year of assessment during which the property is disposed of. The non-resident seller is still required to submit an income tax return for that year.