The scope and levying of interest subject to the withholding tax in terms of sections 50A–50H of the Income Tax Act No. 58 of 1962

Ellané van Wyk and Cara Thiart

South African Journal of Accounting Research, 2017, vol. 31, issue 2, 102-116

Abstract: A withholding tax on interest is levied in terms of sections 50A to 50H of the Income Tax Act No. 58 of 1962 (as amended) and has been effective since 1 March 2015. In this study, certain areas of concern were identified regarding the scope of interest subject to withholding tax and the timing of the levying of the withholding tax. A secondary concern involved the application of section 23M of the Act. A literature review of the theoretical basis for the taxation of interest was undertaken. Relevant terms and phrases; other sections of the Act which might affect, or be affected by the application of the withholding tax on interest provisions; South African case law; international case law and the Model Tax Convention of the Organisation of Economic Cooperation and Development were analysed. Based on the findings, it is recommended that the provisions of section 50A to 50H of the Act be amended or extended to include a definition of interest subject to withholding tax and that section 50D(3) of the Act be amended to allow for interest paid in the form of an annuity to be exempt from withholding tax or for interest subject to withholding tax to be exempt from normal tax. Finally, the alignment of the wording of section 50D(3)(a) and section 10(1)(h)(i) of the Act is also recommended in order to remove contradictions in the accrual and payment of interest and to prevent the potential non-taxation of interest income.

Date: 2017
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DOI: 10.1080/10291954.2016.1144883

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