A
withholding tax, also called a
retention tax, is a government requirement for the payer of an item of income to withhold or deduct
tax from the payment, and pay that tax to the government. In most jurisdictions, withholding tax applies to
employment income. Many jurisdictions also require withholding tax on payments of
interest or
dividends. In most jurisdictions, there are additional withholding tax obligations if the recipient of the income is resident in a different jurisdiction, and in those circumstances withholding tax sometimes applies to
royalties,
rent or even the sale of
real estate. Governments use withholding tax as a means to combat
tax evasion, and sometimes impose additional withholding tax requirements if the recipient has been delinquent in filing tax returns, or in industries where tax evasion is perceived to be common.