ALL of us will soon be paying less income tax compared to the past when the new tax rates announced by the Minister of Finance two weeks ago comes into effect. All that has to happen for the new tax rates to become is effective is that the rates must be tabled and approved in the National Assembly and the National Council whereafter it is published in the Government Gazette. This process could take up to three months to complete. In the meantime employers should use the current tax tables that have been issued by the Ministry of Finance until such time as the new tax tables are issued.
The level of income before tax becomes payable has been increased from N$40 000 a year to N$50 000. This change means that if you earn N$50 000 a year you will have N$2 700 more a year to spend. This amounts to N$225 a month more disposable income. The Minister of Finance indicated that this relief was to ensure people have more money to pay for the basic amnesties of life.
Prior to this year's tax relief, the lowest rate of tax payable was 27 per cent This rate has been reduced to 18 per cent which is also very good news for those people who earn income between N$50 000 and N$100 000 per year. At the N$100 000 earnings level, you will have N$683 a month more to spend on the basic amenities of life. This certainly goes a long way to cover basic expenditure such as water, electricity and some food.
The relief of 9 per cent in the lowest tax rate is most welcome for those individuals who will be subject to tax on pension or provident fund withdrawals on or after 1 March 2013.
In order to make it more affordable for the lower income earners to afford housing, the transfer duty rates have been amended so that the first N$600 000 does not attract any duty. This relief amounts to N$2 000 in transfer duty. The savings in stamp duty for individuals also amounts to N$2 000. This is a total saving of N$4 000 when buying a house and is meant to encourage citizens to acquire their own property.
The Minister of Finance also announced that an environmental tax would be effective later this year in the form of a carbon dioxide emission tax on motor vehicles. The carbon emission factor certified by the vehicle manufacturer will be used as the basis of this tax. The tax will be imposed on all vehicles that are imported to Namibia and will be recovered by the vehicle dealer when it is sold to a purchaser as part of the purchase price. Indications are that this tax will amount to about N$15 000 on a standard 4-wheel drive vehicle. If you intended to buy a new car this year you should consider buying it before this tax is introduced later this year.
The value-added tax registration threshold of N$200 000 will also be increased later this year. Value-added tax was introduced in November 2000 and the registration threshold has never been increased. The increase in the registration threshold is very welcome and should result in fewer taxpayers requiring to be registered once the new threshold becomes effective.
The old age pension amount will be increased by N$50 to N$600 a month. This is an increase of around 9 percent that is higher than the current inflation rate estimated to be around 6,5 percent. In real terms this is a growth of 2,5 percent for pensioners which goes a small way to making it easier for them to cope with the increased cost of living.
Cameron Kotzé is a Tax Partner At Ernst & Young