Section 16(1)(z) of the Namibian Income Tax Act allows the transfer of money, tax free from an ‘approved’ fund to another ‘approved’ fund. ‘Approved’ means approved by Inland Revenue in Namibia. A Namibian tax number evidences such approval (these are referenced 12/1/12/…). In order for a fund to receive tax approval in Namibia it needs to be registered by Namfisa. A Namfisa registration number evidences such registration (these are referenced 25/7/7/…). Your PAYE 5 certificate or correspondence from your fund should reflect the tax approval and registration numbers. If these have a different look to that format, the fund is not a Namibia domiciled fund.
To allow an administrator to transfer money from a Namibia domiciled fund to another fund without deducting tax, the receiving fund must be approved by the Namibian tax authorities, as evidenced by a tax approval number 12/1/12/…
Under certain circumstances, funds domiciled outside Namibia may apply for registration as a foreign fund by Namfisa. Once Namfisa has registered the foreign domiciled fund, it may apply for tax approval by Inland Revenue. Namfisa would lay down certain conditions for registration, essentially in order to protect the interests of the Namibian members of the fund. These conditions relate to reporting and to the investment of assets in Namibia, equivalent to the Namibian liabilities. The advantage of a foreign fund being tax approved in Namibia is that the Namibian tax regime will apply to benefits paid to Namibia members and these members and their Namibian employer may deduct their contributions from their taxable income.
Where a foreign domiciled fund does not have Namibian tax approval, contributions by member and employer are not tax deductible, while Namibian members will be taxed in accordance with the Namibian as well as the foreign tax regime. This could result in benefits being taxed by both regimes, at best with double taxation relief. This, however, always means that the regime producing the higher tax will apply to the Namibian member.
Where a foreign fund has been registered and tax approved in Namibia, it is generally quite onerous for these foreign funds to have Namibian members, in terms of investments, where the equivalent value of these members’ liability should be invested in Namibia, reporting to two statutory authorities and administering tax for two different tax regimes.
If your fund is a foreign domiciled fund with Namibian members, we can assist in finding appropriate solutions.
Important notice and disclaimer
This article summarises the understanding, observation and notes of the author and lays no claim on accuracy, correctness or completeness. Retirement Fund Solutions Namibia (Pty) Ltd does not accept any liability for the content of this contribution and no decision should be taken on the basis of the information contained herein before having confirmed the detail with the relevant party. Any views expressed herein are those of the author and not necessarily those of Retirement Fund Solutions.