One of the important criteria that should be evaluated when making an investment is the after tax rate of return.

The returns of various investment opportunities are taxed differently and you cannot take the best decision if you ignore the tax implications of your investment decision.

The Income Tax Act exempts certain returns on investment from income tax.

If you therefore make use of this opportunity to earn income that is exempt from income tax, you can increase your after tax income legitimately without worrying whether the Receiver of Revenue could ask for any tax.

For many years now the prime exemption limit for interest income derived from investing funds at a Namibian financial institution has remained on N$500.

This is in stark contrast to South Africa where the exemption limit has been revised regularly and the first N$16 500 is now exempt from income tax.

Many of us would argue that our exemption is not significant and therefore it is not worth investing any excess cash with your bank.

Paying off your home loan with after tax income is probably one of the best ways to save - you will be amazed to see what impact an extra N$100 or so has on the term of a home loan.

You should take the interest rate paid by the bank and multiply it by your after tax rate to determine your after tax rate return on the investment at the bank.

If the 32 day deposit interest rate is 6,25% and your marginal tax rate is 35%, the after tax rate is 4,06%.

It is this rate that must be compared to rates which tax free investments return to determine which investment gives you the best after tax return.

Dividends paid out by companies are also exempt from income tax.

You could therefore buy shares with your excess money after having obtained advice on shares that will provide you with a good return and pay no tax on the dividend received.

The risk of getting a return is obviously much higher compared to investing in a 32 day deposit account and this is another factor that should be considered where to in vest your excess cash.

The distribution by a Namibian registered unit trust to unit holders is deemed to be a dividend in terms of the definition of a dividend in our Income Tax Act.

This is a significant concession when compared to the South African scenario where only a portion of the distribution is regarded as a dividend and therefore tax free.

Your full return from an investment in a Namibian unit trust is therefore exempt from income tax.

Interest received or accrued to any person or an external company not carrying on business in Namibia from stock or securities issued by the Namibian Government, regional council or local authority is exempt from income tax.

This will include investments in treasury bills that the Namibian Government issues.

The Income Tax Act also exempts interest received or accrued from investments at the Namibia Post Office Savings Bank from income tax for individuals.

Whatever the rate you earn on your investment is the after tax rate and this should be compared to the interest rate your commercial bank quotes for investments after applying your after tax rate to the investment rate quoted.

Although the Income Tax Act also exempts interest received from investments at building societies this is largely become irrelevant because building societies have disappeared from the business landscape.

There are still some investments that are afforded the exemptions that applied prior to the building societies amalgamating with the commercial banks a few years ago.

Essentially the Special Tax Free Indefinite Period Share Investments where the return on N$100 000 at a rate of 13% is tax free still applies.

You should therefore look at the after tax rate of return as one of criteria to determine where you invest your hard earned funds.

Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com.

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