Remuneration and the liability to withhold PAYE

03 December 2018 | Business

If you are an employee, then most likely any payment received from your employer in respect of services rendered will be subject to Pay-As-You-Earn (PAYE). There is not a way to structure your pay to be tax free.

Definitions

“Employee” is defined in Schedule 2 of the Income Tax Act 24 of 1981 (hereafter referred to as “the Income Tax Act”) as “any person … who receives remuneration or to whom remuneration accrues”. A company is excluded from the definition of “employee”.

An “employer” is defined in Schedule 2 of the Income Tax Act as any person who is liable to pay another person (other than a company) remuneration.

Remuneration

The definition of “remuneration” per Schedule 2 of the Income Tax Act is very broad and covers basically any amount paid to the employee for services rendered.

There are specific inclusions and exclusions from the remuneration definition. These can be found in Schedule 2 of the Income Tax Act.

Items specifically excluded from remuneration

The fact that certain payments might not be subject to PAYE (i.e. the employer will not withhold PAYE on the payments made to the employee/individual) does not mean that it is not taxable. The individual or employee receiving the said income should still declare it in their annual tax returns. This is the case with S&T allowances and certain travel allowances.

Employer’s liability to withhold PAYE

If you are considered as an employer per the Income Tax Act, then you have a liability to withhold the correct PAYE on the payments made to your employees. The applicable tax rates for individuals ending February 2019 can be found on our tax reference card (https://www.pwc.com/na/en/publications/namibia-tax-rate-card.html)

Johan Nel is a partner: corporate tax service at PwC Namibia. This series on tax is published in Market Watch bi-monthly on a Monday.

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