Taxing rendering services outside Namibia
Stefan Swartz
Have you and your employer been in a position where the services you perform, as part of your trade, had to be performed to clients outside of Namibia?
What is the tax exposure in terms of the Income Tax Act 24 of 1981 for the employees who received income (e.g. remuneration) for these services rendered?
Namibia has a source-based tax system, which means that income from a source within Namibia or deemed to be within Namibia will be subject to tax in Namibia, unless a specific exemption is available. The Act makes provisions for specific inclusions in gross income and amounts deemed to be from a Namibian source.
In terms of Section 15(1)(f) of the Act, any income received by a person who is ordinarily resident in Namibia for any services rendered or work or labour done by such a person while temporary absent from Namibia (i.e. the services are rendered outside Namibia), will be deemed to be received from a Namibian source, irrespective from where the payment for such services are made.
From the above it is evident that Section 15(1)(f) has four conditions that must be met:
1. The taxpayer must be ordinarily resident in Namibia;
2. The taxpayer must be employed by an employer in Namibia and the income earned must be for services rendered or work or labour done for or on behalf of such employer;
3. The services or work or labour done must be rendered or done outside Namibia; and
4. The services must have been rendered or work done “during any temporary absence of such person from Namibia”.
TERMS
We have shed some light what is meant by “ordinarily resident” and “during any temporary absence of such person from Namibia” below.
“Ordinarily resident” is not defined in the Act and is therefore a question of fact. The employee may possibly be regarded as being ordinarily resident in Namibia to the extent that, amongst others, he/she calls Namibia his/her true home, if he/she has the intention to live here and to call it his/her true home and that Namibia is the place that he/she would return to after his/her travels.
The services must have been rendered or work done “during any temporary absence of such person from Namibia”. This is not defined in the Act and the taxpayer should look at the facts and circumstances on a case-by-case basis.
An excellent source to consider is the employment contract of the employee which will clearly state the terms of his/her employment and the time he/she will be required to work in Namibia and outside Namibia.
The portion of a taxpayer's remuneration relating to the services rendered outside of Namibia is deemed to be from a Namibian source and should be included in the taxpayer's taxable income if all four requirements listed above is met.
Stefan Swartz is the corporate tax manager at PwC Namibia. Contact him at [email protected]
Have you and your employer been in a position where the services you perform, as part of your trade, had to be performed to clients outside of Namibia?
What is the tax exposure in terms of the Income Tax Act 24 of 1981 for the employees who received income (e.g. remuneration) for these services rendered?
Namibia has a source-based tax system, which means that income from a source within Namibia or deemed to be within Namibia will be subject to tax in Namibia, unless a specific exemption is available. The Act makes provisions for specific inclusions in gross income and amounts deemed to be from a Namibian source.
In terms of Section 15(1)(f) of the Act, any income received by a person who is ordinarily resident in Namibia for any services rendered or work or labour done by such a person while temporary absent from Namibia (i.e. the services are rendered outside Namibia), will be deemed to be received from a Namibian source, irrespective from where the payment for such services are made.
From the above it is evident that Section 15(1)(f) has four conditions that must be met:
1. The taxpayer must be ordinarily resident in Namibia;
2. The taxpayer must be employed by an employer in Namibia and the income earned must be for services rendered or work or labour done for or on behalf of such employer;
3. The services or work or labour done must be rendered or done outside Namibia; and
4. The services must have been rendered or work done “during any temporary absence of such person from Namibia”.
TERMS
We have shed some light what is meant by “ordinarily resident” and “during any temporary absence of such person from Namibia” below.
“Ordinarily resident” is not defined in the Act and is therefore a question of fact. The employee may possibly be regarded as being ordinarily resident in Namibia to the extent that, amongst others, he/she calls Namibia his/her true home, if he/she has the intention to live here and to call it his/her true home and that Namibia is the place that he/she would return to after his/her travels.
The services must have been rendered or work done “during any temporary absence of such person from Namibia”. This is not defined in the Act and the taxpayer should look at the facts and circumstances on a case-by-case basis.
An excellent source to consider is the employment contract of the employee which will clearly state the terms of his/her employment and the time he/she will be required to work in Namibia and outside Namibia.
The portion of a taxpayer's remuneration relating to the services rendered outside of Namibia is deemed to be from a Namibian source and should be included in the taxpayer's taxable income if all four requirements listed above is met.
Stefan Swartz is the corporate tax manager at PwC Namibia. Contact him at [email protected]
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