Guide to Withholding Tax on Royalties Return – Layman Version

Understanding Withholding Tax on Royalties (WTR01) in South Africa:

 

This guide explains the Withholding Tax on Royalties (WTR01), focusing on key information for South Africans who might be paying royalties to foreign individuals or businesses, or for foreign persons receiving such payments. This information is based on the SARS External Guide effective 30 May 2025.

 

What is Withholding Tax on Royalties?

• • The Withholding Tax on Royalties is a tax specifically designed to tax payments made by a South African resident to a “foreign person” (non-resident). This tax is collected by the South African resident (known as the “withholding agent”) on behalf of the non-resident and then paid over to the South African Revenue Service (SARS).
    • What is a “foreign person” (non-resident)? This means any person who is not considered a resident of South Africa. This includes individuals, deceased estates, insolvent estates, companies, and trusts.
    • What is a “royalty”? A royalty is defined broadly and includes any amount received or becoming due for:
      • The use, right to use, or permission to use any intellectual property (like patents, trademarks, copyrights).
      • Sharing or undertaking to share scientific, technical, industrial, or commercial knowledge or information, or providing assistance related to using such knowledge.

How Much Tax Is Withheld?

• • For royalties paid or due on or after 1 January 2015, the Withholding Tax is calculated at a rate of 15% of the amount of royalties paid.
  • Historically, royalties paid between 1 July 2013 and 31 December 2014 had a 12% rate.
  • Can I Get an Exemption or a Reduced Rate?
  • Yes, under certain conditions, a foreign person might be exempt from this tax or qualify for a reduced rate.
  • To apply an exemption or reduced rate, the foreign person must complete a Withholding Tax on Royalties Declaration form (WTRD) and give it to the South African payer (the withholding agent) before the tax is calculated.
  • Important Note: The WTRD form is not submitted to SARS by the taxpayer. The withholding agent (payer) must keep this form for their records, as SARS might request it during an audit.
  • Here are the conditions for exemption (meaning no tax is withheld):
    • The foreign person is a natural person who was physically present in South Africa for more than 183 days in total during the twelve months before the royalty was paid.
    • The property related to the royalty payment is effectively connected with a permanent business establishment of that foreign person in South Africa, and they are a registered taxpayer in South Africa.
    • The royalty is paid by a “headquarter company” for granting the use of intellectual property under specific conditions outlined in section 31 of the Income Tax Act.
  • You might qualify for a reduced rate of tax if there’s a Double Taxation Agreement (DTA) between South Africa and the country where the foreign person resides.
    • SARS provides summaries of these DTA rates on its website.
    • It is the taxpayer’s responsibility to ensure the correct DTA rate is used.
    • If there’s no signed or valid WTRD form provided, the standard 15% rate must be used.

How to File the Withholding Tax on Royalties Return (WTR01)

• • The WTR01 form is used to declare these royalty payments.
  • Obtaining the WTR01 Form: You can get the WTR01 form (and the REV16 refund form) through these channels:
    • The SARS website.
    • Any SARS branch.
    • By calling the SARS Contact Centre at 0800 00 SARS (7277).
  • If using the website, you’ll need to click on the form, complete the required information, and then print it.
  • Submitting the WTR01 Form: You can submit the completed WTR01 form, along with proof of payment and/or the REV16 form, via:
    • The SARS Online Query System (SOQS) on the SARS website.
    • Email (for individual taxpayers: contactus@sars.gov.za; for Tax Practitioners: PCC@sars.gov.za; Large Business or High Net Wealth segments have specific mailboxes).
    • Visiting a SARS branch.

Completing the WTR01 Form – Key Information Required:

• • Period: The year and month (YYYY/MM) when the royalty was paid.
  • Payer’s Entity Type: Select whether the payment was made by a Company/Close Corporation, Trust, Individual/Sole Proprietor, or Other.
  • Particulars of the Payer:
    • For Companies/Trusts: Registered Name, Trading Name, Company/Trust Registration No., Public Officer’s Name, Tax Reference No..
    • For Individuals/Sole Proprietors: Surname, First two names, Trading Name, Tax Reference No., Initials, Date of Birth (CCYYMMDD), ID No., Passport/Permit No., country where passport was issued, Passport issue date, Country of Tax Residence (e.g., ZAF for South Africa).
  • Contact Details: Mandatory fields include email address, Business Tel No., Cell No., and Fax No..
  • Physical Address: The residential address for an individual or the trading premises for a business. Include Unit No., Complex name (if applicable), Street No., Street/Farm Name, Suburb/District, City/Town, Postal Code, and Country Code.
  • Postal Address: This can be the same as the physical address, a PO Box, or a Private Bag. You’ll need to specify details like Postal Agency, PO Box/Private Bag number, Post Office, Postal Code, and Country Code.
  • Number of Foreign Person(s) Paid:
    • You must state the number of foreign persons who received royalty payments from a South African source.
    • The form can detail a maximum of 10 payments. If you made more than 10 payments, you should detail the 10 highest payments and then consolidate the remaining transactions into a “Consolidation” section, providing the “Gross Amount of Royalties” and “Total Tax Payable”.
    • Alternatively, if you prefer not to consolidate, you can submit the balance of transactions on a separate WTR01 return form.
    • While the form may pre-populate DTA rates based on the “Country of Tax Residence,” you can override this if the rate has changed or is not applicable. Remember, if there’s no valid WTRD, use the 15% rate.

How to Make the Withholding Tax on Royalties Payment

• • All Withholding Tax on Royalties payments to SARS must be made using eFiling.
    • Currency Conversion: If the amount you withheld was in a foreign currency, you must convert it to South African Rand using the spot rate on the date the amount was withheld.
    • eFiling Activation: Your entity must be activated for WTR on eFiling to make a payment.
    • Payment Process via eFiling:
  • Log onto eFiling.
  • Go to the ‘Additional Payments’
  • Click on the ‘Create Additional Payment’
  • Under “Tax Type,” select “Withholding Tax on Royalties (WTR)” from the drop-down menu.
  • Capture all the requested details.
  • Enter the WTR amount declared on your WTR01 return.
  • Click “Make Payment”.
  • Confirm the payment amount, which will log you into your online banking function to release the payment request.
  • Click “Confirm” again, acknowledging that a payment instruction cannot be reversed once submitted.
  • You can then view your payment history and print a confirmation receipt.
    • Due Date Rule: If the last day for payment falls on a public holiday or weekend, the payment must be made on the last working day prior to that public holiday or weekend.

How to Claim a Refund for Withholding Tax on Royalties (REV16 Form)

• • A refund can be claimed under specific circumstances using the REV16 form.
    • When a Refund is Possible: A refund is typically considered if:
  • An amount of Withholding Tax was withheld.
  • The declaration form (WTRD) was not submitted to the payer by the required date.
  • However, the WTRD form is subsequently submitted to SARS within three years after the royalty was paid.
    • If the foreign person fails to submit the declaration form on time, they will initially have to pay the full withholding tax rate.
  • Who Claims the Refund? The withholding agent (the South African payer) is the one who must complete a REV16 form and claim the refund from SARS.
    • Generally, the refund amount will be paid to the withholding agent, not directly to the foreign recipient of the royalty.
    • However, SARS can effect a refund directly to the foreign person if they have a South African bank account.
  • What to Submit with REV16: You need to submit the completed REV16 form, the tax declaration form (WTR01), and a power of attorney to SARS.

Key Information Needed on the REV16 Form (Part A: Claimant):

• • Claimant Details: Full Name(s), Surname/Registered Name, Address, Contact email, Postal address, Contact Telephone No..
  • Tax Details: Select “Withholding Tax on Royalties” as the Tax Type, provide your Tax Reference Number, and Identity/Passport/Registered No..
  • Request Type: Indicate whether you are requesting a “Refund” or a “Transfer to another tax account”.
  • Amount and Reason: Enter the specific refund or transfer amount you are claiming, and clearly state the reason for the claim.
  • Payment Details: Provide the Date of payment, the Amount paid, the Amount that should have been paid, and the Overpayment now claimed.
  • Declaration: Indicate if the declaration was made by the Taxpayer or a Representative.
  • Signature: The form must be signed and dated (CCYY-MM-DD) by the taxpayer or an authorised representative.
  • SARS will review the claim and process it accordingly.