An analysis of the proposed introduction of resident shareholder dividend tax in Namibia
Itope, Etiigwana Selma Neloolo
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In Namibia, dividends received are exempt from income tax in the hands of all taxpayers. Dividends declared to foreign shareholders are however subject to non-resident shareholder’s tax (NRST). NRST, which is a withholding tax, is levied on non-resident shareholders. One of the proposed changes announced by the Minister of Finance in his mid-term budget review for the 2018/2019 tax year include the introduction of a resident shareholder’s tax. The proposed introduction of the resident shareholder’s tax will mean that all dividends paid by Namibian companies will be subject to dividends tax regardless of whether it accrues to a non-resident shareholder or a resident shareholder. The objective of the proposal is to enhance fairness and equity of the tax system between local and foreign investors who are already subject to a withholding tax on dividends. Similar to NRST, the resident shareholder’s tax will be treated as final withholding tax. This means that the company paying the dividend will withhold the necessary tax on behalf of the taxpayer. There is a great concern from various stakeholders including the civil society, local investors, and the general public of the impact that this newly proposed resident shareholder’s tax will have. There is hence an urgent need to increase the understanding of this newly proposed tax and ensure that it is formulated in such a way that it will achieve its intended purpose without rendering Namibia unattractive for potential investors. Given the above concerns, this study will analyse and evaluate the proposed resident shareholders’ dividend tax. By gaining an understanding of the proposed tax and comparing it to similar countries’ dividend tax regimes, it will contribute to the body of knowledge around the newly proposed resident shareholder’s tax and possibly assist with its eventual successful implementation. Also by doing a benchmark to similar dividend taxation legislations of other similar countries, it could be determined if this newly proposed legislation is in line with the common practice and if lessons could be learned from other developing countries in terms of their dividend tax regimes. This study will further enrich literature on the Namibian tax policy.