How would one determine if the individual needs to pay the 15% withholding tax in their capacity as non resident. ...or to include the Interest in their SA return, due to the loan being made to a SA company when they were still living in SA.
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
In terms of section 50C(1) a foreign person to which an amount of interest is paid is liable for the withholding tax on interest to the extent that the interest is regarded as having been received by or accrued to that foreign person from a source within the RSA in terms of section 9(2)(b). A ‘foreign person’ means any person that is not a resident (section 50A(1)). In terms of section 9(2)(b) an amount is from a source within the RSA if that amount constitutes interest as defined in section 24J where that interest:
(i) is attributable to an amount incurred by a person that is a resident, unless the interest is attributable to a permanent establishment which is situated outside the RSA; or
(ii) is received or accrues in respect of the utilisation or application in the RSA by any person of any funds or credit obtained in terms of any form of interest-bearing arrangement.
From that it is apparent that the fact that is relevant is that, at the time, the interest is paid by a resident (the company) it is paid to a foreign person.
In the foreign person’s return of income, the interest is declared as exempt from normal tax – this is under section 10(1)(h).