Tax can be a tricky thing, and it gets trickier the bigger our global village grows. As more people move away from their countries of birth, putting down roots elsewhere and earning an income in foreign countries, tax can get confusing. This is because many countries take a dualistic approach to tax – meaning that the tax authority has staked a claim on both the worldwide income of their own residents, as well as the domestically-earned income of non-residents. Basically, if there’s money, the tax authority wants to know about it. Such an approach results in a conflict of interests, known as double taxation: the same income earned by the same taxpayer is liable to be taxed in both the source country and the country of tax residence.
What about the case of South Africans working in Namibia? This creates a conflict, as Namibia has a source-based approach to tax, meaning that they want to tax all money made in Namibia, while South Africa takes a residence-based approach, meaning that they want to tax their residents on all income, no matter where it is sourced. Accordingly, a South African will be taxed on income earned in Namibia twice, unless there is taxation relief available to that individual. Let’s take a look at what the Double Tax Agreement between Namibia and South Africa means for Saffer expats working in Namibia.
Tax in Namibia: the facts
As mentioned, Namibia has a source-based system of taxation. As such, any cash or income accumulated by an individual from a source in Namibia is subject to tax in Namibia, unless it is of a capital nature.
- The applicable tax rate for individuals is determined on a sliding scale, with the minimum rate being 0% and the maximum 37%.
- The Namibian tax year runs from 1 March to the last day of February the following year.
- The Namibian tax authority is called the Namibian Inland Revenue Authority (NIRA).
What are the income tax rules in Namibia?
Who is liable for income tax in Namibia?
- Any person who renders services such as employment services within Namibia, is subject to income tax in Namibia, where their income exceeds 50,000 Namibian dollars (NAD) per year.
- Where the person is a non-resident, that individual may claim relief from tax in Namibia in terms of a Double Taxation Agreement (DTA), as long as they meet the requirements laid out in the DTA.
What types of income are taxable in Namibia?
Generally, most types of remuneration and employment-related benefits earned by any person from a Namibian source will count as taxable income. This applies regardless of whether the person making the payment is a resident of Namibia or not, except for a few exceptions.
Typical taxable income forms are:
- Basic salaries, wages, leave pay, and bonuses, as well as fees and commissions and contractual gratuities.
- cash allowances such as traveling, entertainment and work-related expenses.
- Non-cash benefits such as accommodation allowances, cost-of-living allowance, reimbursements of taxes, and perks such as the use of a company car or a rental car.
Double taxation treaty between South Africa and Namibia
Subject to certain conditions, relief from Namibian tax for a person earning in Namibia is available where the individual is a resident of a country that has a DTA in place with the NIRA. Article 15.1 of the Double Tax Agreement between SA and Namibia provides that salaries, wages and other similar remuneration derived by a resident of South Africa will only be taxable in South Africa unless the employment is exercised in Namibia. If the employment is exercised in Namibia, the income derived therefrom is taxable in Namibia. In other words, the Double Tax Agreement does not give a sole right of taxation, and it is necessary for the individual to rely on the section 10(1)(o)(ii) exemption contained in the Income Tax Act, referred to as the 183 and 60 days rule in order to gain relief.
To utilise the double tax agreement exemption
- The individual must not be present in Namibia for more than 183 days during the period referred to in the DTA (183 days/60 days section 10(1)(o)(ii) Income Tax Act exemption rule).
- The employer that handles payment must not be a resident of Namibia, and
- The remuneration must not be handled through a permanent establishment or fixed base of a foreign employer in Namibia.
Tax relief in South Africa
- If tax is paid on income in Namibia, and the individual meets the time-based rules to utilise the exception, it is possible to claim a tax credit in South Africa on this tax already paid. Income earned in Namibia must be declared in a South African tax return and proof must be provided that tax has already been paid on this income to the NIRA.
FinGlobal: cross-border financial specialists for South African expats
Confused about your tax status and your tax liability? FinGlobal can help you get clarity on your situation and ensure that you are compliant with both tax authorities in South Africa and Namibia, by ensuring that you are in a position to properly utilise the relief contained in the applicable Double Tax Agreement until you are ready to complete tax emigration from South Africa.