Proposed Income Tax Changes: Layman's Bill Out for Comments

These are proposed income tax changes that are still under discussion and are not yet in effect. This summary is provided to keep you informed and assist with planning should the proposed amendments be implemented.

New Commutation Rules for Pension, Preservation and Retirement Annuity Funds

The proposed amendments aim to increase the commutation threshold for pension, preservation and retirement annuity funds from N$50,000 to N$375,000.

The proposed rules are:

• If the annuity value exceeds N$375,000, only one-third may be taken as a lump sum.

• If the annuity value is N$375,000 or less, the full amount may be taken as a lump sum.

  
  

New Definitions

• Small and Medium Business

A Small and Medium Business (SME) is proposed to be defined as a Namibian-registered business with an annual turnover of N$10 million or less, excluding personal service providers.

• Personal Service Provider

A Personal Service Provider is proposed to mean a company or trust that mainly provides services through connected persons under conditions resembling employment, unless it employs at least three unrelated full-time employees.

Certain Dividends Derived from Hybrid Mismatch Arrangements

Dividends received from hybrid financial instruments (a combination of debt and equity) will be treated as ordinary taxable income in the hands of the recipient.

Exemptions

The proposed amendments include:

• Removal of the current dividend tax exemption.

• Introduction of an exemption for government grants received by State-Owned Enterprises.

  
  

Changes to Housing Benefits

The proposed changes provide greater tax relief for lower-income employees.

• Where an employee's annual remuneration is N$100,000 or less, the housing benefit will be fully exempt from income tax.

• Where the above does not apply, one-third of the housing benefit will be tax exempt, provided the total annual housing benefit does not exceed N$400,000.

  
  

Assessed Losses

The rules relating to the carrying forward of assessed tax losses are proposed to change as follows:

• Five years for most taxpayers.

• Ten years for taxpayers operating in:

  • Mining

  • Petroleum

  • Green Hydrogen

  • Renewable Energy industries (including hydro, solar, wind and thermal energy).

    
    

Determination of Taxable Income for Insurance Businesses

The taxation of long-term insurers will be updated to align with international accounting standards (IFRS).

Introduction of Dividend Tax

A new dividend tax is proposed with the following features:

• Tax rate: 10% on dividends, including interim dividends, declared by resident companies.

• Applicable to:

  • Namibian residents

  • Businesses

  • Deceased estates

  • Holders of bearer scrip

• Certain exemptions will apply.

  
  

Proposed Corporate Tax Rates

The proposed company tax rates are:

• Non-mining companies: 28%

• Small and Medium Enterprises (SMEs): 20%

• Export Processing Zone (EPZ) enterprises: 20%

  
  

Deductibility of Environmental Rehabilitation Costs

Mining companies will be allowed to claim tax deductions for contributions made to approved environmental rehabilitation companies or trusts, subject to specific conditions.

Proposed Effective Dates

The proposed amendments are expected to apply as follows:

• Individual Taxpayers

For individual taxpayers (non-companies), the amendments will apply from the year of assessment commencing on or after 1 March 2026.

• Companies

For companies, the amendments will apply to tax years commencing on or after 1 January 2026.

• Assessed Losses

The proposed changes relating to the limitation of assessed losses (Section 21) will apply to tax years commencing on or after 1 January 2024.

• Dividend Tax

The proposed Dividend Tax (Section 35C) will apply to tax years commencing on or after 1 January 2026.

Need assistance?

For more information or professional tax advice, please contact our Tax Team.

Senior Tax Manager

Pricilla Beukes

+264 61 382 600

pricilla.beukes@crvw.com.na