The recent 2024/2025 budget speech by the Minister of Finance introduced changes to the income tax thresholds for individuals. These changes are set to take effect on 1 March 2024. Below, we discuss the income tax changes that were introduced and how they will affect individuals.
What is income tax?
Income tax is a financial levy imposed by the government of Namibia on the income generated by individuals or businesses within Namibia. It serves as a primary source of revenue that funds public services, infrastructure development, and government programs. Understanding how income tax works empowers you to fulfil your civic duty and manage your finances effectively.
Basic income tax concepts:
- Taxable Income: This refers to the gross income an individual or business earns, minus allowable deductions and exemptions. Examples of taxable income include salaries, wages, commissions, interest earned on investments, rental income, and business profits.
- Tax Rates: The government establishes progressive tax rates, meaning the tax rate increases as taxable income rises. This system aims to achieve a degree of fairness by requiring those with higher incomes to contribute a larger share of their earnings.
- Tax Brackets: Tax brackets define the income ranges and their corresponding tax rates. For example, using the old brackets, one might pay 10% tax on income up to N$50 000 and 15% on income exceeding that amount.
- Filing Taxes: Taxpayers are required to file a tax return with the government (through the Namibia Revenue Agency “NamRA”) annually or according to a designated schedule. This return details their income, deductions, and calculates any taxes owed or refundable.
- Deductions: These are expenses a taxpayer can subtract from their gross income to reduce their taxable income. Examples include business expenses, charitable contributions, and mortgage interest payments (depending on regulations).
- Exemptions: These are fixed dollar amounts subtracted from taxable income before tax rates are applied. They can significantly reduce tax liabilities, particularly for low-income earners.
Income tax plays a vital role in:
- Funding Public Services: Tax revenue finances essential services like education, healthcare, national defense, and infrastructure development.
- Promoting Economic Growth: Governments can use tax policies to incentivize investment and economic activity.
- Redistributing Wealth: Progressive tax structures can help achieve a more equitable distribution of income within a society.
Different Types of Income Tax:
- Individual Income Tax: Applies to the income earned by individuals through employment, investments, or business activities.
- Corporate Income Tax: Levied on the profits generated by corporations.
- Capital Gains Tax: Taxed on profits earned from the sale of assets like stocks, bonds, or real estate.
For this article, we will focus on individual income tax. Before 1 March 2024, this was the individual income tax brackets:
| Individual Income Tax | Progressive rates up to 37% |
| NAD 0 – 50,000 | 0% |
| 50,001 – 100,000 | 18% |
| 100,001 – 300,000 | 9,000 + 25% on excess |
| 300,001 – 500,000 | 59,000 + 28% on excess |
| 500,001 – 800,000 | 115,000 + 30% on excess |
| 800 001 – 1,500,000 | 205,000 + 32% on excess |
| Over 1,500,000 | 429,000 + 37% on excess |
| Interest income | 10% when paid by a registered banking institution or unit trust scheme in Namibia; and on any interest paid by any person to a non-resident |
Main income tax changes introduced
The main income tax measures announced in the budget statement include:
- An increase in the individual income tax threshold from NAD 50,000 to NAD 100,000 from 1 March 2024, along with adjustments in the tax brackets as follows:
- up to NAD 100,000 – 0%
- NAD 100,001 to 150,000 – 18%
- NAD 150,001 to 350,000 – 25%
- NAD 350,001 to 550,000 – 28%
- NAD 550,001 to 850,000 – 30%
- NAD 850,001 to 1,550,000 – 32%
- NAD 1,550,001 and over – 37%
The income tax threshold is the minimum amount of taxable income an individual has to earn before they are required to start paying income tax. Essentially, it is the point at which your income becomes taxable. The new adjustment now means that individuals earning N$100 000 or less per year will not be paying any income tax. However, the adjustment will not just benefit those who earn below N$100 000, all the brackets have been moved upwards by an additional N$50 000. As such tax payers in each bracket will enjoy an extra amount of at least a N$ 800.00.
Below is an example of the new adjustment:
If you earn an annual taxable income of N$360 000 using the income tax tables to calculate your tax payable your tax bill:
Before the threshold adjustment
Tax = 59 000 +28% (360 000- 300 000) = N$75 800
As such, on a monthly basis ( N$ 75 800/12) one paid: N$ 6 316. 66
After the threshold adjustment
Tax = 59 000 +28% (360 000- 350 000) = N$61 800
As such, on a monthly basis ( N$ 61 800/12) one will now pay: N$ 5 150.00; leaving them with an extra N$ 1 166.66
How does the income tax changes affect you?
This means that the tax bill is now 18.5% lower with the new adjustment. This new adjustment will benefit all individual taxpayers by providing them with additional disposable income. However, do take note that the tax savings are different depending on which tax bracket you fall in.
Here are some ways you can reduce your tax liabilities legally increasing your disposable income.
Last but not least by understanding the fundamentals of income tax, you can make informed financial decisions, fulfil your tax obligations, and contribute to the collective well-being of your community. And with this disposable income now available to you, maybe it is time to make some strategic investments and financial decisions.
This article does not constitute legal and/or financial advice. Kindly consult a registered financial or legal professional for appropriate advice on the subject matter.
