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Tax issues

Are foreign lenders and debt security holders subject to tax on interest payments?

Angola

Angola

Yes. Under the capital investment tax. Foreign lenders at a rate of 15%, and debt security holders at a rate of 10%.

In the first case: The tax is assessed by the holder of the income, except when they do not have a residence, registered office, effective management or fixed establishment in Angola, in which case it should be assessed by the debtor of the income.

Regarding the debt security holder, the liquidation is made by the entities that are responsible for the payment of the income, which are responsible for the totality of the tax and legal additions, in case of non-payment.

If such entities do not have a residence, head office, place of effective management or permanent establishment in Angola to which the payments are attributable, the beneficiary of the income shall be liable to pay the tax.

Last modified 23 Jul 2020

Australia

Australia

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

Generally no.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes.

Last modified 3 Dec 2019

Belgium

Belgium

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 18 Dec 2019

Brazil

Brazil

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

The transfer of funds into Brazil by way of loan  between a foreign lender and a domestic borrower is subject to the financial transactions tax (IOF), at a 6% tax rate, if the loan’s average maturity term is 180 days or less. For loans with an average maturity longer than 180 days, the IOF is currently reduced to 0%.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 4 Dec 2019 | Authored by Campos Mello Advogados

Canada

Canada

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 2 Jan 2020

Chile

Chile

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 6 Dec 2019 | Authored by BAZ|DLA Piper

Colombia

Colombia

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

Lenders who are not resident in Colombia and whose only Colombian source income are interest payments, are not required to file an income tax return in Colombia, provided that any applicable withholding tax has been adequately charged. In this event, the withholding tax becomes the final tax due in Colombia. If these conditions are not fulfilled, an income tax return is due and the tax has to be calculated according to the general rules (which tax the profits of foreign lenders on a net, rather than gross, basis at a rate ranging from 33% to 40%).

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes. However, if the exception from withholding tax for interest payments on debt securities issued and traded outside of Colombia applies, an income tax return would not be required.

Last modified 20 Oct 2017 | Authored by DLA Piper Martinez Beltrán

Czech Republic

Czech Republic

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

Double tax treaties and relevant EU Directives apply to any payments of interest from Czech Republic to lenders resident in other countries.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

Finland

Finland

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 26 Nov 2019

France

France

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 4 Dec 2019

Germany

Germany

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

A lender which is not resident in Germany would only be subject to tax in Germany to the extent it receives German source income. German source income in this regard only includes interest paid on a:

  • loan secured by real estate located in Germany or ships registered in a German register; and
  • profit-participating loan.

Therefore, a lender which is not resident in Germany, would not be taxed on ‘plain vanilla’ interest income in Germany.

It should also be noted in this regard that most German double tax treaties exclude a German taxing right on interest payable or paid to a lender resident in the other contracting state (meaning that there is full exemption), and otherwise, most German double tax treaties limit Germany´s taxing right to 10% withholding tax.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Interest paid on a bond is generally not included in German source income. It is, however, included in German source income if:

  • the bond is not held in a securities deposit account at the financial services provider paying out the interest; and
  • the interest is paid on presentation of the respective interest coupon either in cash or by crediting such amount to an account of a person or entity that is not a bank or a financial services provider.

It should also be noted in this regard that most German double tax treaties exclude a German taxing right on interest paid or payable to a person resident in the other contracting state (meaning there is full exemption). Otherwise, most German double tax treaties limit Germany's taxing right to a withholding tax rate of 10%.

Last modified 20 Oct 2017

Ghana

Ghana

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)? 

No. 

Would the same analysis apply to interest payments under a debt security (e.g. a bond)? 

Yes.

Last modified 15 Jan 2020 | Authored by Reindorf Chambers

Hungary

Hungary

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No, provided that the lender does not have a permanent establishment in the jurisdiction of the borrower (ie in Hungary).

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

Ireland

Ireland

The lender should not (in practice) be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch). The same analysis would apply to interest payments made in respect of debt securities.

 

Last modified 16 Jul 2020

Italy

Italy

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

In general terms interest on bonds paid to foreign qualified investors is exempt from withholding tax and the securities to the bond may benefit, upon specific option, to the Substitutive Tax regime.

Last modified 22 Jan 2020

Ivory Coast

Ivory Coast

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

The lender will be taxed on interest payments under a loan in the jurisdiction of the borrower.

The entity receiving interests is supposed to record and declare it under their corporate income tax heading.

There is no withholding tax on interest for natural persons.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes, it will.

Suppression of income tax on interest on Treasury bills and bonds taken out by natural persons (Article 12).

The General Tax Code subjects the income from non-bond loans to the tax on receivables (IRC) and fixes the applicable rates as follows:

  • 10% for bonds and bonds of 3, 6, 9 or 12 months;
  • 5% for those whose maturity is 3 to 5 years.

Last modified 3 Aug 2020

Japan

Japan

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes.

Last modified 5 Dec 2019

Luxembourg

Luxembourg

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 10 Dec 2019

Mauritius

Mauritius

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)? 

No. 

Would the same analysis apply to interest payments under a debt security (e.g. a bond)? 

Yes.

Last modified 6 Dec 2019 | Authored by Juristconsult Chambers

Mexico

Mexico

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 5 Dec 2019

Morocco

Morocco

No.

Last modified 6 Jan 2020

Netherlands

Netherlands

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No, unless the lender holds 5% or more of the shares in the borrower, and holds its participation with tax avoidance being the primary goal or one of the primary goals. In that instance, the lender is charged with corporate income tax at a rate ranging between 19% and 25% in 2019 and 16.5% and 25% in 2020, depending on the total amount of income received.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 6 Dec 2019

New Zealand

New Zealand

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes.

Last modified 13 Dec 2019

Norway

Norway

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

Peru

Peru

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 5 Dec 2019 | Authored by DLA Piper Pizarro Botto Escobar

Poland

Poland

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 6 Dec 2019

Portugal

Portugal

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 6 Dec 2019

Puerto Rico

Puerto Rico

In general, foreign lenders and foreign debt security holders not engaged in a trade or business in Puerto Rico are not subject to Puerto Rico income tax on interest payments, unless they fall within the definition of ‘related persons’ of the Puerto Rico Internal Revenue Code of 2011, as amended.

Last modified 11 Dec 2019

Romania

Romania

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

Russia

Russia

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 5 Dec 2019

Senegal

Senegal

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

A withholding tax applies to interest payments remunerating loans granted by lenders (company) or individuals who do not have a permanent establishment or are not resident in Senegal.

Holders of debt securities are taxable if they are tax resident.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

The same analysis applies to interest payments under a bond. The General Tax Code subjects the income from non-bond loans to the tax on deposit (IRC) and fixes the applicable rates as follows:

  • 16% for income from receivables deposits and guarantees; and
  • 8% for income from receivables deposits and guarantees opened in the accounts of a bank, a financial institution, etc.

Last modified 29 Jul 2020

Singapore

Singapore

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

Slovak Republic

Slovak Republic

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes.

Last modified 6 Dec 2019 | Authored by independent tax advisor Radislav Bibel

South Africa

South Africa

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Last modified 5 Dec 2019

Spain

Spain

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 5 Dec 2019

Sweden

Sweden

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding tax (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 22 Jan 2020

Thailand

Thailand

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Yes.

Last modified 4 Apr 2020

Ukraine

Ukraine

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 24 Jan 2020

UK - England and Wales

UK - England and Wales

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 6 Dec 2019

UK - Scotland

UK - Scotland

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 20 Oct 2017

United Arab Emirates

United Arab Emirates

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (eg by virtue of incorporation, residence or local branch)?

No.

Would the same analysis apply to interest payments under a debt security (eg a bond)?

Yes.

Last modified 23 Jan 2020

United States

United States

Will the lender be taxed on interest payments under a loan in the jurisdiction of the borrower (other than by way of the application of withholding taxes (if any)), assuming the lender is not otherwise resident in that jurisdiction for tax purposes (e.g. by virtue of incorporation, residence or local branch)?

Federal taxes

A lender which is not resident in the US, e.g. a corporation, can be subject to income tax in the US at regular graduated tax rates, even without a physical presence, by engaging in a financing trade or business, or using the debt instrument in any other trade or business within the US. To have such a trade or business, US activities must be conducted on a considerable, continuous, and regular basis.

State and local taxes

A lender which is not resident in the US, e.g. a corporation, can be subject to income tax in the jurisdiction of the borrower even without a physical presence by engaging in a financing trade or business or otherwise using a note in its trade or business within that jurisdiction, or simply based on receiving a certain threshold of interest from borrowers and other income from within the jurisdiction (so called 'economic nexus').

Would the same analysis apply to interest payments under a debt security (e.g. a bond)?

Federal taxes

Yes, the analysis described above is applicable to interest payments under both a loan and other forms of debt securities.

State and local taxes

Yes, the analysis described above is applicable to interest payments under both a loan and other forms of debt securities.

Last modified 24 Jan 2020

Are stamp, registration, transfer or other similar taxes applicable?

Yes. Stamp and registration taxes are applicable. Regarding the transfer taxes, they are also applicable, and the value added tax (VAT) on transfers of goods and services carried out in the national territory for consideration and imports of goods which the investor will carry out shall also apply.

Do tax authorities take priority on enforcement?

According to the tax enforcements code of Angola, the complaint of the acts of the tax enforcement process on the grounds of suspension foreseen in the tax enforcement code are considered urgent processes and, as such, they always run continuously, having priority before the other acts of the Court.

Is withholding tax on interest payments applicable?

Yes, it is applicable, according to article 29 of the Capital Tax Code, the paying entity retains the rate of 10% of income and delivery to the state.

Are foreign lenders and debt security holders subject to tax on interest payments?

Yes. Under the capital investment tax. Foreign lenders at a rate of 15%, and debt security holders at a rate of 10%.

In the first case: The tax is assessed by the holder of the income, except when they do not have a residence, registered office, effective management or fixed establishment in Angola, in which case it should be assessed by the debtor of the income.

Regarding the debt security holder, the liquidation is made by the entities that are responsible for the payment of the income, which are responsible for the totality of the tax and legal additions, in case of non-payment.

If such entities do not have a residence, head office, place of effective management or permanent establishment in Angola to which the payments are attributable, the beneficiary of the income shall be liable to pay the tax.

Luís Filipe Carvalho

Luís Filipe Carvalho

Partner
DLA Piper Africa, Angola (ADCA)
[email protected]
T +244 926 612 525
View bio

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