The Namibian government wants to implement new measures to provide relief to taxpayers through the introduction of an Income Tax Amendment Bill, tabled in the National Assembly this week.

Motivating the bill, Deputy Finance Minister Maureen Hinda-Mbuende proposed a rise in the threshold for the pension fund deductible amount, from N$40 thousand to N$150 thousand.

It also suggests a rise in the taxable amount for educational expenditures to encourage taxpayers to save more for their children.

"The deductible amount on pension fund and educational policy contributions will increase from the current limit of N$40,000 to N$200,000. This will motivate taxpayers to contribute more to the education of Namibian children. Similarly, the increase in the deductibility of pension fund contributions is aimed at encouraging taxpayers to save for retirement."

The bill further introduces certain provisions aimed at curtailing the challenges of base erosion and profit shifting, by multinational enterprises. 

"In this specific instance, an amount earned from the sale or transfer of ownership of a petroleum license is considered to form part of gross income; however, the law currently has no deeming provision that will treat such income as having been sourced from Namibia. This amendment will then subject income from these types of transactions that might occur outside Namibia taxation."

As such, income earned from the sale or transfer of a certain product, be it sourced from inside or outside the country but traded in Namibia, is to be considered part of gross income.

"The bill further introduces thin capilization rules. The rules enable the tax administration agency to disregard any interest payment that is claimed by a taxpayer that exceeds the three-to-one ratio as a result of financial assistance received from a related foreign company. This measure will help to combat base erosion and profit shifting in that companies will not be allowed to shift income earned in Namibia under the guise of exorbitant interest" 

Maureen Hinda-Mbuende says the amendments are necessary to provide a measure of relief to taxpayers and to further enhance the efficiency of the tax system.