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Namibia: Tax on Non-Resident
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The Namibian (Windhoek)
15 April 2008
Posted to the web 15 April 2008
Windhoek
Namibian salary income In this series of articles, Cameron Kotze - the Tax Partner at Ernst and Young - discusses some topical tax issues for our readers.
Namibia taxes income on a source basis as opposed to the residence basis. The Namibian tax system is therefore not concerned where a taxpayer is resident.
The source-based tax system rather looks at the place where the income has been earned from as opposed to where the taxpayer is resident and, if the place where the income is earned from is located in Namibia, it looks to tax the income. The term source is not defined in the Income Tax Act. The court decisions on the meaning of the term follow the principle of determining the originating cause of the income. This could be capital employed, trade carried on, services rendered or contract entered into depending on the circumstances.
If the cause of the income is situated in Namibia, then the income is from a Namibian source. For purposes of the Income Tax Act it is submitted that the territory of Namibia does not extend to beyond the twelve nautical miles territorial waters. There are certain exceptions to the general rule regardless of the actual source of the income because section 15 deems this income to be from a source in Namibia.
Examples of the deeming provisions include the following: * Income derived from a contract entered into in Namibia for the sale of goods regardless of where the goods are produced or delivered; * Income from the use or right to use any patent, design, trademark, copyright or similar property regardless of where the intellectual property was developed or the right to use was granted; * Income from imparting scientific or commercial knowledge for use within Namibia; and * Income derived by a company incorporated or managed and controlled in Namibia as owner or charterer of any ship or aircraft regardless of where the ship or aircraft operates.
With regard to services rendered, the originating cause of services is not the place where the agreement to render the services is entered into but rather the place where the services are actually rendered. If the place where the services are rendered is located in Namibia, then the income is taxable in Namibia. Generally, non-residents who are temporarily employed in Namibia will therefore be liable to tax in Namibia.
Where the non-resident is a resident of a country with whom Namibia has signed a double tax agreement, the income derived from services in Namibia may not necessarily be taxed in Namibia. The double tax agreements generally have the well-known 183-day rule that should be read in conjunction with other requirements relating to the place where the employer carries on business to determine where the individual should be taxed.
It is therefore important to note that you cannot rely on the 183-day rule only to determine where you are taxed on income that is derived from a source in Namibia. It is Revenue practice to tax individuals who are temporarily employed in Namibia on their income from day one if they are resident in a country that has not signed a double tax agreement with Namibia because the income relates to services rendered physically in Namibia.
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On the basis that your employer has sent you to Namibia to render services in this country, you cannot expect the Revenue to be sympathetic to non-disclosure of your income to pay tax in this country.
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