Withholding taxes – extended to service fees

Taxpayers have been anticipating the introduction of a withholding tax on interest paid to non-residents for a number of years now. The effective date for the commencement of the withholding tax on interest will be further delayed from 1 July 2013 to 1 March 2014. The royalty withholding tax to be imposed at a rate of 15% (which is currently imposed at a rate of 12%) will also be delayed until 1 March 2014.

Most significantly, it is proposed that a withholding tax, presumably at a rate of 15%, will be imposed on service fees paid to a non-resident (subject to the applicable treaty relief). The withholding tax on service fees will also be effective from 1 March 2014. It will be interesting to see how the legislature defines “service fees” or “services” to determine how far-reaching this amendment will be.

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