Namibia, Republic of
Namibia has a source-based tax system, which means that income from a source within Namibia or deemed to be within Namibia will be subject to tax in Namibia, unless a specific exemption is available.
Calculation of taxable income
|Gross income||The total amount, in cash or otherwise, received by or accrued to any person from a source within, or deemed to be within, Namibia, excluding receipts of a capital nature.
The Income Tax Act makes provisions for specific inclusions in gross income and amounts deemed to be from a Namibian source.
|Less: Exemptions||The Income Tax Act provides for certain amounts to be specifically exempt from income tax.|
|Less: Deductions||The Income Tax Act provides for certain expenditures and losses actually incurred to generate income to be deducted, provided that these expenses are not personal domestic expenses or of a capital nature.|
|The Income Tax Act specifically provides for certain expenditures to be deductible and allows a deduction for capital allowances (e.g. building or vehicle).|
|Only expenses incurred to generate ‘income’ may be deducted. Expenses incurred to generate income exempt from tax are not deductible. Apportionment should be considered when expenses are incurred to generate both taxable income and exempt income.|
|Equals: Taxable income||Taxable income is taxed at the individual tax rates as set out under the personal income tax rates section below.|
Personal income tax rates
The tax rates for the fiscal year 1 March 2017 through 28 February 2018 are as follows:
|Taxable income (NAD*)||Tax on column 1 (NAD)||Tax on excess (%)|
|Over (column 1)||Not over|
* Namibian dollars
Withholding taxes (WHTs) are applicable where dividends and royalties (or similar payments) are declared/distributed to non-Namibian residents or where Namibian residents make use of certain services rendered by non-residents.
The gross amount of interest received by any person (other than a Namibian company) from a registered banking institution or unit trust scheme registered in Namibia is subject to WHT of 10%. A new WHT on interest of 10% applies on all interest paid by a Namibian resident to a non-resident.
Dividends declared by a Namibian company to a non-resident person will be subject to non-resident shareholders tax (NRST), a WHT.
NRST is payable at the standard rate of 10% where a company holds more than 25% shares in the Namibian company. In all other cases, NRST payable is 20%. The rate of NRST may be reduced if a DTA is in place with Namibia.
NRST is payable within 20 days following the month in which the dividends were declared.
‘Dividends’ means “any amount distributed by a company … to its shareholders…”.
The Namibian company paying the dividend is responsible to withhold the NRST.
A WHT of 10%, calculated on the gross amount of interest, is payable on interest accruing to any person, other than a Namibian company, from a registered banking institution or unit trust scheme in Namibia. The tax withheld is a final tax, and the financial institution is responsible to withhold the tax. It is the obligation of the financial institution to withhold the tax and pay such tax over to the revenue authorities.
A WHT of 10% will also be payable on the gross amount of any interest paid by any person to a non-resident. The WHT is due 20 days following the month in which the interest was paid. Interest is deemed to be paid on the earlier of actual payment or when the interest is due and payable.
Interest paid by the state to any person and interest paid by any bank of Namibia to a foreign bank are exempt from WHT on interest.
Royalties or similar payments
WHT is levied at 10% on any royalty paid to a person other than a person ordinarily resident in Namibia or a domestic company (i.e. a non-resident), including a right to use industrial, commercial, or scientific equipment. Consequently, the tax base is now extended to include rentals for the hire of scientific, industrial, or commercial equipment from non-resident persons.
WHT on royalties is due 20 days after the end of the month during which the said liability is incurred or the said payment is made.
The Namibian company paying the royalty is responsible to withhold the tax.
WHT of 10% on services applies to any Namibian resident paying a management, consultancy, or entertainment fee to a non-resident.
A resident includes (amongst others):
- a company doing business in Namibia (irrespective of whether registered in Namibia or not) and includes a branch of such company, or
- a partnership, board, trust that is formed or established or incorporated under the laws of Namibia or which is doing business in Namibia, and includes a branch of such partnership, board, or trust.
A non-resident means a person/company that is not a resident.
Management and consulting fees are specifically defined as “any amount payable for administrative, managerial, technical, or consultative services or any similar services, whether such services are of a professional nature or not”.
The legislation imposes the obligation on the Namibian resident to withhold a 10% tax on such fees paid to the non-resident. It is important to note that the legislation also specifically includes any directors fees paid to a foreign director; however, please note that the WHT applicable on director's fees payable to non-residents is 25% (effective 21 June 2016).
In certain cases, tax treaties can provide a reduced rate (see the Withholding taxes section in the Corporate tax summary for the treaty rates). It should be noted that the tax treaties contain certain requirements that should be met before the reduced rate may be applied.
In certain cases, tax relief in respect of interest, dividends, royalties, and services are only applicable where the beneficial owner of such income is a company. Careful considerations should therefore be given to the requirements for application of treaty relief in the case of individuals. The definitions of dividends, royalties, interest, and services in the various treaties should also be considered.
There is no treaty relief in respect of director's fees payable to non-residents.
Taxation of benefits from pension provident and retirement annuity funds
|Pension fund||Provident fund||Retirement annuity fund|
|Withdrawal||Any amount not transferred to similar fund is taxed at the greater of 18% or the average tax rate.||Any amount not transferred to similar fund is taxed at the greater of 18% or the average tax rate.||No withdrawal benefits before the age of 55 years.|
|Retirement||Total lump-sum is tax free, but monthly annuities received is taxed at the marginal rate.||One-third of total benefit is exempt from tax and the remainder taxed at the marginal rate.||Total lump-sum is tax free, but monthly annuities received is taxed at the marginal rate.|
|Death||Total lump-sum is tax free if less than 50%
Should the lump-sum be more than 50%, it is fully taxable and monthly pensions received by a dependent are taxed at the marginal rate.
|One-third of total benefit is exempt from tax and the remainder taxed at the marginal rate.||Total lump-sum is tax free if less than 50%.
Should the lump-sum be more than 50%, it is fully taxable and monthly pensions received by a dependant are taxed at the marginal rate.
|Retrenchment||Any amount not transferred to a similar fund is taxed at the average rate.||Any amount not transferred to a similar fund is taxed at the average rate.||N/A|