There are no standard deductions for employees for business expenses. Travel, entertainment, and motor vehicle expenses are potentially deductible, but the onus is on the employee to prove they were incurred in the production of taxable income. Where allowances are provided by the employer, this onus is more readily discharged, but the deduction cannot normally exceed the allowance.
An employee may deduct contributions of up to NAD 40,000 per annum to an approved pension, retirement annuity, provident, and educational policy fund registered in Namibia.
Personal and domestic expenses (e.g. mortgage interest) are not deductible.
Namibian tax legislation does not provide for the carrying back of tax losses.
Ring fencing of losses from certain trades
Ring fencing entails that a taxpayer may not offset losses from certain trades against income from other trades.
Ring fencing is applicable on the following types of loss-making trades:
- Trades incurring losses for at least three of five years from 1 March 2011 onwards, or
- Trades involving:
- Sporting activities.
- Dealing in collectables.
- Rental of residential accommodation (unless 80% is used by non-relatives for at least half of the year of assessment).
- Rental of vehicles, aircraft, and boats (unless 80% is used by non-relatives for at least half of the year of assessment).
- Animal showing.
- Farming or animal breading, unless carried on a full-time basis.
- Carrying on of creative arts.
- Gambling or betting.
The ring fencing will only apply to natural persons with taxable income in excess of NAD 200,000 per year (disregarding any losses).
Ring fencing can be avoided where a taxpayer can prove that the trade:
- constitutes a business with a prospect of being profitable, and
- generated taxable profits for at least five years out of ten years from 1 March 2011 (provided that further requirements are met, we propose further consultations with our tax experts).