Govt enforces tax on S&T

COMPANIES have been directed to enforce the provisions of the Income Tax Act that seeks to have subsistence and travelling allowances (S&T) taxed.

Country manager for Ernst and Young Namibia Cameron Kotze confirmed that the provision has always been there as section 14 (1) of the Income Tax Act, read together with the definition of gross income, specifically includes any amount received.

“Whether in cash or otherwise, from the employer, for services rendered in a person’s taxable income,” he said.

Sources claim that the enforcement might be a result of budget cuts.

Practice Note 3 of 2001 states that the S&T must reflect on the workers’ tax certificate, and that the workers will deduct actual business expenditure when they submit their income tax returns.

The note says that the workers will “therefore only be taxable on the unexpended portion of the S&T received”.

According to Kotze, the deduction of expenses incurred in respect of S&T is exactly what section 14 (1) of the act allows for .

“It only seeks to include and tax the S&T amount received from the employer, to the extent that it has been incurred for the purposes that it was granted for, for example, to spend on subsistence or travel while away from the normal place of residence,” he said.

The S&T amount itself is not subject to PAYE at the time that it is paid, but is taxable to the extent that it is not used for subsistence and travel for purposes of work.

“The S&T payable to an employee is therefore only taxed when the Receiver of Revenue issues a tax assessment, based on what the employee submits with regard to the subsistence and travel expenditure incurred for purposes of work. This is, therefore, not new,” said Kotze.

According to him, employees can get their tax back should their employer decide to tax S&T if the assessment of expenditure claimed is allowed by the Receiver of Revenue.

“I think S&T should be taxed, and the employee must submit claims for expenditure with the tax return to make sure that there is no tax payable on the S&T amount,” said Kotze.

He advised that expenses for food be deducted from the S&T amount so that it is not taxed, and if it is taxed at the time of payment and claimed when the annual tax return is submitted, it will not be taxed at the end of the day.

“The S&T amount must be fair and reasonable to cover expenses the employee may have incurred while away from his usual home to do work for the employer. This is usually why a fixed amount per day or fixed amount per kilometre is paid,” he added.

PricewaterhouseCoopers’ partner, Johan Nel, said when workers are paid S&T, they have a responsibility to keep documentary proof of the expenses incurred in respect of the money received.

“This must be presented with the submission of your income tax return. Where you do not have proof of the expenses incurred, you will be liable for tax on the full amount of S&T allowance received,” he reasoned.

Nel added that very often, people end up paying huge sums of tax on allowances when they should not, and blame their employers.

“Although it may be the fault of the employer to some extent, we very often see that it actually relates to allowances that the employee received during the year and did not submit to tax,” he said.

Namibia Employers Federation chairperson Tim Parkhouse said he was not aware of the regulation, but the excess S&T over actual expenditure can be termed as remuneration, and thus can be taxable as an income.

Parkhouse said in terms of practicality, taxing S&T would be problematic, and asked what a realistic claim would be.

He added that rumours have been circulating that some officials have been gaining a lot of money through claiming S&T, saying the process should not be abused.

“The taxation of any unused amount might be a way of controlling this. However, again the burden of the administrative process of the implementation might be prohibitive,” he said.

Last month, while addressing his staff, President Hage Geingob also spoke out about S&T being used as a cash cow by civil servants, who he said he had been told end up fighting over trips.

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