Is withholding tax applicable on interest similar to dividend tax on ALL interest earning investments except Tax free investment from when?
Important:
This answer is based on tax law for the tax year ending 28 February 2020.
Answer:
Yes, the withholding tax on interest, sections 50A – 50H of the Income Tax Act, is substantially the same as the dividends tax. The main difference is that section 50A refers to a “foreign person” (being any person that is not a resident of the RSA) whereas section 64D refers to the “beneficial owner” (being the person entitled to the benefit of the dividend attaching to a share).
The withholding tax on interest is NOT (as you say) “applicable to everybody not only interest payable to non citizens” – it only applies where the payment is made to a foreign person as indicated above. In addition, section 50D provides instances where the amount of interest paid by a specific entity (the government, banks, etc.) is exempt from the withholding tax on interest.
Based on the current policy with regard to the taxation of interest and interest is substantially different to dividends, we would not be willing to propose a change to tax law. Nothing prevents you of making a submission to National Treasury in this regard in your own capacity.