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5.4. Tax Base for Non-Resident Entities

Non-resident entities operating in Namibia through a permanent establishment ('PE') are subject to tax on income sourced from Namibia. The taxable base is determined in a manner substantially similar to that of resident companies. Expenses incurred in Namibia towards the production of taxable income or the maintenance of a source of income are deductible for tax purposes. As a result, any expenses which are not directly related to the specific business activity carried out in Namibia are not deductible. Further, fees paid by the branch or PE to the head office (unless deduction allowed under a tax treaty) are generally not deductible for tax purposes. However, reimbursement of actual expenses may be allowed as deductible expenditure, subject to certain conditions.

Non-resident entities deriving income from sources in Namibia without a PE are subject to withholding tax on their income. Dividends received by non-resident shareholders from a company are subject to Non-resident Shareholder’s Tax ('NRST') (See Sec 8.2.2). NRST is applicable on dividends payable to a shareholder who is:

  • A non-resident natural person;
  • A non-resident company;
  • A company (whether or not managed and controlled in Namibia) with more than 50% of the capital being held, either directly or through a nominee or some other company or companies, for the direct or indirect benefit of one or more non-resident companies.

However, the NRST may be reduced under a tax treaty.