Clarity on tax treatment on investment by non- South African residents National Treasury PRESS RELEASE CLARITY ON TAX TREATMENTS ON INVESTMENTS BY NON-SOUTH AFRICAN RESIDENTS The tax treatment of interest earned by non-residents has been amended. The amendments will apply in respect of any interest that accrues, is received, becomes payable or is deemed to have accrued on or after 1 July 2013. Current tax treatment Currently, our tax system provides for a blanket tax exemption on interest payable to foreign residents with two exceptions, namely: 1. Foreign residents (company or individual) who conduct business in South Africa through a permanent establishment (e.g. a foreign company or individual operating in SA in the form of branch, office, factory, workshop, mine etc.) 2. The exemption also does not apply to foreign resident individuals that are physically present within South Africa for more than 183 days during the relevant year of assessment. Therefore, bonds issued to a foreign person will be exempt from tax in SA, unless it falls 1 and 2 in above. Tax treatment from 1 July 2013 With effect from 1 July 2013, SA government will introduce a withholding tax on interest at a rate of 15%. The withholding tax will apply to all interest paid by South African residents to foreign residents. However, interest from domestic debt paid to foreign portfolio investors will remain exempt from tax. Specifically, the following exemptions will apply to interest paid or accrued to foreign residents from the following: 1. Bonds issued by any sphere of Government (National, provincial or local government) ; 2. Listed debt instruments ( e.g. bonds listed on the JSE) 3. Any debt owed by a domestic bank or South African Reserve Bank; DBSA and the IDC. (Please note that this exemption does not include back-to-back loan agreement designed to avoid the 15 % withholding tax) 4. Domestic dealer and brokerage accounts and 5. Domestic investment schemes’ 6. In respect of bills of exchange, letters of credit or similar instrument. Issued by: National Treasury Date: 10 December 2012 Date: 10/12/2012 05:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.