Taxation of international assignees
Source Provisions
Types of Taxable Compensation
Tax-Exempt Income
Expatriate Concessions
Taxation of Investment Income
Taxation of lump-sum payments
General deductions
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/jurisdiction which an individual considers to be their real home, i.e. the place where their permanent place of abode is, where their belongings are stored, which they leave for temporary absences and to which they regularly return after such absences. If the taxpayer is habitually and normally resident in Namibia, apart from temporary or occasional absences of long or short duration or if they decide to settle permanently in Namibia, Namibia is recognized as being their 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 employer by whom the ordinary resident is employed in Namibia, the income received by the ordinary resident is subject to tax in Namibia, subject to Double Tax Agreement (“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:
Intra-group statutory directors
Will a non-resident of Namibia who, as part of their employment within a group company, is also appointed as a statutory director (i.e. member of the Board of Directors in a group company situated in Namibia) trigger a personal tax liability in Namibia, even though no separate director's fee/remuneration is paid for their duties as a board member?
A personal tax liability will be triggered due to the fact that fees/ remuneration was paid for services that were rendered in Namibia, and therefore this would constitute Namibian-source income which is subject to tax in Namibia.
a) Will the taxation be triggered irrespective of whether or not the board member is physically present at the board meetings in Namibia?
Directorship services are generally treated as being rendered at the head office of the company where the Board of Directors regularly exercise their decision making. Therefore, should a Board of Directors of a company regularly exercise their decision-making in Namibia, those board fees will be treated as Namibian source income and therefore taxable in Namibia.
b) Will the answer be different if the cost directly or indirectly is charged to/allocated to the company situated in Namibia (i.e. as a general management fee where the duties rendered as a board member is included)?
This will not change. Refer to a) above.
c) In the case that a tax liability is triggered, how will the taxable income be determined?
The total fees/ remuneration paid to the director will be apportioned with reference to the proportion of physical days spent rendering directorship services in Namibia over the total number of days of the relevant year of assessment.
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:
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 (NAD) |
Base Rate (NAD) |
Percentage % |
0 - 50,000 |
0 |
0% (Exempt) |
50,001 - 100,000 |
0 |
18 % of the amount exceeding NAD50,000 |
100,001 - 300,000 |
9,000+ |
25% of the amount exceeding NAD100,000 |
300,001 - 500,000 |
59,000+ |
28% of the amount exceeding NAD300,000 |
500,001 - 800,000 |
115,000+ |
30% of the amount exceeding NAD500,000 |
800,000 - 1,500,000 |
205,000+ |
32% of the amount exceeding NAD800,000 |
Exceeds 1, 500,000 |
429,000+ |
37% of the amount exceeding NAD1,500,000 |
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/jurisdiction, where:
Namibia has double tax agreement with the following countries/jurisdictions:
The NIRA does not adopt the economic employer approach to interpreting Article 15 of the Organisation for Economic Co-operation and Development (OECD) treaty. There is no indication that this approach will be adopted in the near future.
There are no general tax credits that can be claimed against a taxpayer’s taxable income.
This calculation assumes a married taxpayer resident in Namibia with two children whose 3-year assignment begins on 1 March 2017 and ends 28 February 2020. The taxpayer’s basic salary is 100,000 US dollars (USD) per annum and the calculation covers 3 years.
Year ended |
2018 USD |
2019 USD |
2020 USD |
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 |
3,000 |
3,000 |
Interest income from a Namibian registered bank |
6,000 |
6,000 |
6,000 |
Exchange Rate: USD1 = NAD12
Calculation of Taxable Income
Year ended |
2018 |
2019 |
2020 |
Days in Namibia during tax year |
365 |
365 |
365 |
NAD |
NAD |
NAD |
|
Salary |
1 200,000 |
1 200,000 |
1 200,000 |
Bonus |
240,000 |
240,000 |
240,000 |
Cost-of-living allowance |
120,000 |
120,000 |
120,000 |
Housing allowance (only 2/3 of NAD144,000 is taxable) |
96,000 |
96,000 |
96,000 |
Company car (18 percent *USD50,000* 12) |
108,000 |
108,000 |
108,000 |
Relocation expense reimbursement (not taxable) |
NA |
NA |
NA |
Home leave |
NA |
NA |
NA |
Total gross income |
1,764,000 |
1,764,000 |
1,764,000 |
Less: Pension fund contributions (limited to NAD40,000) |
(36,000) |
(36,000) |
(36,000) |
Taxable income |
1,728,000 |
1,728,000 |
1,728,000 |
Calculation of Namibian tax liability |
513,360 |
513,360 |
513,360 |
On an amount of NAD1 500,000 |
429,000 |
429,000 |
429,000 |
37 percent on balance exceeding NAD 1 500,000 |
84,360 |
84,360 |
84,360 |
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.
Disclaimer:
All information contained in this publication is summarized by KPMG Advisory Services (Namibia) (Pty) Limited, a Namibian limited liability company and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The information contained in this publication is based on the Income Tax Act, No 24 of 1981.
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