Types of Taxable Compensation
Taxation of Investment Income
Taxation of lump-sum payments
Tax rates (for all years of assessments from 1 March 2009)
Return of income and compliance
Relief from foreign tax liability
General Tax Credits
Sample Tax Calculation
Although the Namibian tax legislation is source based, the Income Tax Act does not define the term ‘source’. The meaning of the source is determined with reference to case law, which establishes the meaning to be ‘originating cause’.
Therefore where a person (i.e. an ordinary resident of Namibia or a non-resident of Namibia) receives income where the ‘originating cause’ is services rendered within Namibia, the income will be subject to Namibian tax. Where the person is a non-resident, the person may receive relief from being taxed in Namibia if a Double Taxation Agreement (“DTA”) is available which provides for exemption or a credit for tax.
The concept of ordinarily resident is not defined in the Income Tax Act, but is widely held (from case law) to be the country which an individual considers to be his/her real home, i.e. the place where his/her permanent place of abode is, where his/her belongings are stored, which he/she leaves for temporary absences and to which he/she regularly returns after such absences. If the taxpayer is habitually and normally resident here, apart from temporary or occasional absences of long or short duration or if he/she decides to settle permanently in Namibia, Namibia is recognised as being his/her real home and the individual will become a resident by virtue of ordinary residence immediately.
Where an ordinary resident of Namibia renders services outside Namibia during any temporary absence, for or on behalf of any employer1 by whom the ordinary resident is employed in Namibia, the income received by the ordinary resident is subject to tax in Namibia, subject to DTA relief if a DTA is available.
Generally speaking, most types of remuneration and benefits received by any person from a Namibian or deemed Namibian source for services rendered constitute taxable income regardless of whether the person making the payment is a resident of Namibia or not or where so ever payment is or is to be made subject to certain exceptions.
Typical items of an expatriate compensation package set out below are fully taxable:
Non-cash items which are fully taxable unless otherwise indicated:
The following items are not taxed in the hands of the employee:
Lump-sum payments from retirement/pension/preservation/provident funds are fully taxable unless otherwise indicated. The amount of the lump-sum payment is generally governed by the rules of the fund:
Lump-sums from a provident and preservation fund paid out as result of resignation or dismissal, termination or dissolution of the fund are fully taxable. One third of the lump-sum paid out by a provident and preservation funds is exempt, subject to certain conditions being met.
Payment of the entire lump-sum from a pension, provident and preservation fund into another approved pension, provident, retirement annuity and preservation fund, transferred for the benefit of the taxpayer during or within 3 months after the year of assessment, is not taxable.
The items, which are allowable as a deduction in the calculation of income tax payable by an individual, depend on the nature of the income and the trade.
Expenses of a revenue nature which are wholly, exclusively, and necessarily incurred in the production of gross income, and which are not specifically disallowed, are deducted in the computation of taxable income.
No deduction can be made in determining the taxable income, where the expenditure items include among others:
Individuals are entitled to the following deductions.
|Taxable Income (N$)||Base Rate||0%|
|0 - 50 000||N$0||0%|
|50 001 - 100 000||N$0||18 % of the amount exceeding N$50 000|
|100 001 - 300 000||N$9 000+||25% of the amount exceeding N$100 000|
|300 001 - 500 000||N$59 000+||28% of the amount exceeding N$300 000
|500 001 - 800 000||N$115 000+||30% of the amount exceeding N$500 000|
|800 000 - 1 500 000||N$205 000+||32% of the amount exceeding N$800 000|
|Exceeds N$1 500 000||N$429 000+||37% of the amount exceeding N$1500 000|
Subject to certain conditions, relief from Namibian tax will apply where the assignee is a resident of Namibia and on an assignment to a treaty country, where:
Namibia has double tax agreement with the following countries:
There are no general tax credits that can be claimed against a taxpayer’s taxable income.
This calculation2 assumes a married taxpayer resident in Namibia with two children whose three-year assignment begins on 1 March 2010 and ends 28 February 2013. The taxpayer’s basic salary is USD100 000 per annum and the calculation covers three years.
|Salary||100 000||100 000||100 000|
|Bonus||20 000||20 000||20 000|
|Cost-of-living allowance||10 000||10 000||10 000|
|Housing allowance||12 000||12 000||12 000|
|Company car||9 000||9 000||9 000|
|Relocation expense reimbursement||20 000||NA||NA|
|Home leave flight cost (only for the assignee and for business purpose)||5 000||NA||10 000|
|Pension premiums paid to a Namibian registered pension fund||3 000
|Interest income from a Namibian registered bank||6 000||6 000||6 000|
|Exchange Rate: USD1:NAD8|
|Days in Namibia during tax year||365
|Salary||800 000||800 000||800 000|
|Bonus||160 000||160 000||160 000|
|Cost-of-living allowance||80 000||80 000||80 000|
|Housing allowance (only 2/3 of USD96 000 is taxable)||64 000||64 000||64 000|
|Company car (18% *USD50 000* 8)||72 000||72 000||72 000|
|Relocation expense reimbursement (not taxable)||NA||NA||NA|
|Total gross income||1 176 000||1 176 000||1 176 000|
|Less: Pension fund contributions (limited to NAD40 000)||(24 000)||(24 000)||(24 000)|
|Taxable income||1 152 000||1 152 000||1 152 000|
|Calculation of Namibian tax liability||384 940||384 940||384 940|
|On an amount of USD750 000||236 200||236 200||236 200|
|37% on balance exceeding NAD750 000||148 740||148 740||148 740|
1 “Employer” is defined by the Income Tax Act as “…any person…who pays or is liable to pay to any person other than a company any amount by way of remuneration…”
2 Sample calculation generated by KPMG Advisory Services (Namibia) (Pty) Limited, the Namibian member firm of KPMG International, based on the Income Tax Act, No 24 of 1981.
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