Tax Guide for US Expats Living and Working in Namibia
Who Is Liable For Income Taxes in Namibia
Individuals are taxed on employment and self-employment income at progressive marginal rates. Income tax is assessed only on income from sources within or deemed to be within Namibia and is generally not affected by the residence of the taxpayer.
Income subject to tax
Employment income. Employment income is taxable in Namibia if it arises from a source within, or deemed to be within, Namibia. The place where the services are rendered generally determines the source of remuneration. However, income from services related to employment or a profession in Namibia is deemed to be from a Namibian source, regardless of where services are performed or payment is made. For example, income for services rendered during a temporary absence from Namibia by a person ordinarily resident in Namibia is subject to tax if the services are rendered for or on behalf of a Namibian employer.
Taxable employment income consists of salaries and bonuses, in cash or in kind, and fringe benefits, including the use of company vehicles, free housing and interest-free or low-interest loans.
Self-employment income. Capital and exempt receipts and allowable deductions are subtracted from gross income to arrive at taxable self-employment income, which is taxed with other income at the rates.
Investment income. Interest and dividends from building societies received by a Namibian resident from anywhere in the world are deemed to be from Namibian sources and are taxable with other income at the rates. An exception is made if the investment originates outside Namibia or is made for a business carried on outside Namibia and if the interest is taxed outside Namibia.
Interest earned by individuals from local commercial banks is subject to a 10% withholding tax. Interest income that is subject to this withholding tax is exempt from normal income tax.
The following income is exempt from tax:
- Interest from stock or securities issued by the government of Namibia or any local authority
- Interest from deposits in the Namibia Post Office Savings Bank
- Worldwide dividends accrued on ordinary and preference shares
The interest portion of distributions received from unit trusts is specifically excluded from the definition of “dividend.” As a result, such portion is taxable in the hands of unit holders.
Individuals are subject to tax on such portion at the marginal tax rate.
Namibian unit trusts must withhold tax on the interest portion of distributions to any persons other than Namibian companies. Unit trusts must withhold tax at a rate of 10% on the interest portion of distributions to individuals and non-Namibian companies.
Rental income is aggregated with other income and taxed at the rates set forth in Rates.
In the absence of an applicable double tax treaty, nonresidents are subject to the following final
withholding taxes: a 10% nonresident shareholder’s tax (NRST) on dividends declared and a 10.5% tax on royalties paid to nonresidents. No withholding tax is imposed on interest paid to a nonresident, but regular income tax is payable at the rates set forth in Rates.
Directors’ fees. Namibian-source directors’ fees are subject to tax with other income at the rates. The source of the directors’ fees is the location of the head office of the company of which the taxpayer is a director. This rule does not apply to remuneration for special services, which may be sourced where the services are rendered.
Other income. Partnerships are not treated as separate taxable entities. Partners are taxed on their share of net partnership income.
Taxation of employer-provided stock options. Namibian tax legislation does not specifically address the tax treatment of employer-provided stock options. In general, options are taxed at the time of vesting on the difference between the exercise price and the fair market value of the stock at the time of exercise.
Capital gains. Capital gains are tax-exempt in Namibia.
Deductions
Deductible expenses. Noncapital expenses incurred in the production of income are deductible. An annual deduction of N$40,000 per person is allowed for total contributions made to approved retirement annuity funds, pension funds and provident funds.
Donations to registered welfare organizations and approved educational institutions are deductible if the recipient issues to the donor a certificate recording certain specified information.
Business deductions. Noncapital expenses incurred in producing taxable income are deductible.
Relief for losses. A loss may be carried forward to the next year to be offset against income in that year. If a taxpayer carries a loss forward from the previous year and has no trading activities during a year of assessment, the loss is terminated and may not be carried forward into the following year; otherwise, the loss may be carried forward indefinitely. Losses may not be carried back.
B. Social security
Employees under 65 years of age who are employed for more than two days a week and all employers are subject to social security contributions. Employees must contribute 0.9% of monthly compensation, subject to a minimum of N$2.70 and a maximum of N$27 per month. Employers must contribute an amount equal to the employee’s contribution. Self-employed individuals must contribute 1.8% of monthly compensation, limited to N$54 per month.
In addition, a contribution to the Workers’ Compensation Fund must be made for each employee earning less than N$72,000 a year.
Double tax relief and tax treaties
A tax credit is available for direct tax and withholding taxes paid to foreign jurisdictions. The credit may not exceed the Namibian tax applicable to the underlying income. Namibia has entered into double tax treaties with the following countries.
Botswana
Malaysia
South Africa
France
Mauritius
Sweden
Germany
Romania
United Kingdom
India
Russian Federation
The treaties follow the model treaties of the Organization for Economic Cooperation and Development (OECD).
To learn more about the history, culture, economy and other information about Namibia
We have been preparing US income tax returns for US Citizens and permanent residents living in Namibia for over 15 years. As a US Citizen or permanent resident (green card holder) you are required to file a US return each year regardless of the fact that you file and pay taxes in your residence country. The expatriate earned income exemption ($100,800 for 2015) can only be claimed if you file a timely tax return. It is not automatic if you fail to file.
We have scores of clients located in Namibia and know how to integrate your US taxes into the local income taxes you pay. Any income tax you pay there can be claimed as a dollar for dollar credit against the tax on your US return on the same income.
As an expat living abroad you get an automatic extension to file until June 15th following the calendar year end. (You cannot file using the tax fiscal year for US tax purposes). You must pay any tax that may be due by April 15th in order to avoid penalties and interest. You can get an extension to file (if you request it) until October 15th.
There are other forms which must be filed if you have foreign bank or financial accounts; foreign investment company; or own 10% or more of a foreign corporation or foreign partnership. If you do not file these forms or file them late, the IRS can impose penalties of $10,000 or more per form. These penalties are due regardless of whether you owe income taxes or not.
There are certain times you may wish to make elections with respect to your Corporation or Investment Company which will give you US tax benefits. There are other situations where forming a US corporation to receive your business income may be more advantageous than using a corporation in your resident country. We can help you with these decisions.
If you are self-employed while working, you will have to pay US self-employment taxes (social security). If you are a bona-fide employee you do not have to worry about paying US social security on your wages earned in Namibia.
We have helped hundreds of expats around the world catch up because they have failed to file US returns for many years. Unfortunately, unlike India, Canada, UK, etc. you must also file so long as you are a US citizen or resident. You can if you follow proper IRS and State Department procedures surrender your US Citizenship and therefore cut off your obligation to pay US taxes in the future. You must surrender that Citizenship for non-tax avoidance reasons and then can usually not return to the US for more than 30 days per year for the subsequent ten years.
Let us help you with your US tax returns, US tax planning and other US tax and legal concerns. Download our expat tax questionnaire or request a consultation by phone, skype or email