What happens if you borrow a large sum of money from your rich uncle overseas and use the money to buy an investment property - whether in full or part. Can you claim the interest? If the loan was properly documented then there would be no reason why the usual principles governing deductibility of interest would not apply so the interest would generally be deductible. But when paying interest overseas the payer of the interest is required to withhold tax from that interest before it is sent off. This is to make sure the government gets its tax out of the transaction as otherwise it would have no jurisdiction to collect the tax if the non resident would not pay. Failure with withhold tax will mean the interest will not be deductible to you.