S.Africa: SARS Issues Binding Private Ruling on Cross Border Interest-Free Loan, Withholding Tax on Interest

The South African Revenue Service (SARS) May 28 issued Binding Private Ruling (BPR) 192 on whether an adjustment made to taxable income or tax payable under Section 31 of the Income Tax Act No. 28 of 1962 can trigger withholding tax on interest levied under Sections 50B and 50E. The proposed transaction is an interest-free and unsecured loan advanced by a foreign company with no permanent establishment (PE) in South Africa (Applicant) to a domestic company that is a related party to the Applicant (Co-Applicant). SARS ruled that in the event an adjustment is made to taxable income or tax payable under Section 31: 1) the Applicant will not be liable for withholding tax on interest under Section 50B; and 2) the Co-Applicant will have no obligation to withhold an amount of withholding tax on interest under Section 50E. [South Africa, Revenue Service, 05/28/15]