Payment of Interest to Non-Fixed Term Saving
Withholding Tax-Payment of Interest to Resident Savers for Non-Fixed Term Saving Accounts
In this case, we are banks and we have many resident savers/investors/depositors (individual or company) to deposit their cashes in our banks. When they deposited in our banks, and then banks will pay them interests, but before interest payment, banks have responsibility to withhold tax on interest from resident savers/investors/depositors .
Term “Non-Fixed Term Saving Accounts” means resident savers/investors/depositors can withdraw their principals/money anytime from bank without penalty.Non-Fixed Term Saving Accounts will get lower interest than Fixed Term Deposit Accounts.
Withholding tax on interest for non-fixed term saving accounts is 4%.
Example 1
Assume resident BBB Company and Mr.A deposited 20,000$ and $10,000 respectively during January 2019 to XYZ Bank in Cambodia, but during January, BBB and Mr.A withdrew their cashes many times for use.
Assume that XYZ Bank calculated gross interest payment to BBB company and Mr.A are $50 and $30 respectively.
Required:
Calculate withholding tax on interest expense that XYZ Bank will withhold tax before interest payment.
Answer
Withholding tax (WHT) on interest payment
Gross Interest expense to BBB = $50
Gross Interest expense to Mr.A = $30
WHT on interest from BBB = $50*4%=$2
WHT on interest from Mr.A = $30*4%=$1.2
XYZ Bank will pay cash of $48 (50-$2) and $28.8 (30-1.2) to BBB Company and Mr.A respectively.
END OF LESSON