This is a question that must have gone through the mind of many people who have registered and have been receiving the state old age grant/ pension upon having turned 60.

The answer is fairly simple – yes it is taxable. In terms of the definition of ‘gross income’ in sub-section (a) of section 1 of the Income Tax Act, “any amount received or accrued by way of annuity” is gross income and anything that meets the definition of gross income is taxable in the first instance, unless the Act provides for an exemption or a deduction of an amount that is gross income in the first instance. The Act contains no provision that exempts or allows as a deduction the amount received by way of the state old age grant/pension.

The fact that no income tax is deducted and that the taxpayer is not issued a PAYE 5 certificate for the pension received in any year of assessment has no bearing on the taxability of the pension. The obligation to deduct income tax and to issue PAYE 5 certificates in respect of tax deducted is contained in Schedule 2 to the Act. Here the definition of “remuneration” is instructive as to when income tax has to be deducted, namely only in respect of “remuneration” as defined. Sub section (b) (iii) of this definition specifically excludes “any pension or allowance under the Social Pensions Act, 1973…or any grant or contribution under the provisions of section 89 of the Children’s Act, 1960…”

The state old age grant/ pension should thus be reflected as income in the taxpayer’s annual income tax return and will be subject to income tax provided the taxpayer’s total taxable income for the year of assessment exceeds the threshold of currently N$ 50,000.

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.