Self-assessment – what are our obligations?

In this series of articles, Cameron Kotze – the Tax Partner at Ernst and Young – discusses some topical tax issues for our readers.

SECTION 56 of the Income Tax Act provides for the taxpayer’s responsibility relating to the submission of income tax returns and the payment of income tax. The self-assessment basis of taxation became effective for all tax years starting March 1 1999.Part of the self-assessment system is that the employer should withhold employees’ tax (PAYE) on a final deduction basis so that the employee has no further tax liability.For purposes of the self-assessment system, individual taxpayers have been classed into three groups.One group consists of those taxpayers who work for the same employer throughout the tax year (the period March 1 to February 28 the following year), earn interest for the tax year amounting to less than N$500 and who are not entitled to any deduction (such as travel or entertainment expenses) from the income earned for the tax year.This group must submit their tax returns (currently a brown form) by June 30 each year if they receive a tax return from the Receiver of Revenue.In terms of the self-assessment system, the employer should withhold and pay over the employee’s tax for the year.If any tax is payable, it must be paid within 60 days after the date of the tax assessment.The second group of taxpayers are those that are entitled to deduct expenses from allowances they receive as part of remuneration, or who work for more than employer during the tax year, or who receive interest in excess of N$500 interest during the tax year.This group must submit their tax returns (currently a blue form) by June 30 each year.The tax return must include a calculation of the tax payable (from there the term self-assessment) and the amount of tax payable must be paid on or before June 30.The third group of taxpayers can be described as those who are self-employed or receive income from carrying on a trade in addition to their salary income.These taxpayers must submit their tax returns (currently a yellow form) by September 30 each year.They are required to perform the self-assessment calculation and pay the tax owing by September 30.The Receiver of Revenue can, upon receiving your written request, grant you extension of time to submit your income tax return.Although you can also obtain extension of time to pay your income tax liability if you are not able to pay your tax by the due date, this will come at a cost.The Receiver of Revenue will impose interest on the late payment of the tax at a rate of 20 per cent calculated daily and compounded monthly.This interest rate is an exceptionally heavy penalty for not being able to pay on time when compared to the current overdraft interest rate of 12,25 per cent charged by commercial banks.Even if you receive no tax return from the Receiver of Revenue, the obligation is on you to obtain a tax return from the Receiver in terms of section 56(7) of the Income Tax Act and then to comply with the other provisions regarding the submission of the tax return and payment of income tax.The self-assessment system is far too complicated for the average taxpayer in Namibia and the Receiver of Revenue will be well advised to educate taxpayers to ensure they at least know what is expected from them.Many taxpayers, rightly or wrongly, plead ignorance when it comes to the self-assessment system.The fact is that the Receiver of Revenue expects us to know the requirements of the law and to comply with it.In recent weeks the Receiver of Revenue has held workshops around the country to inform taxpayers about tax matters and hopefully these basic issues were covered at these meetings.* Should readers have queries, they are invited to send them to cameron.kotze@za.ey.comThe self-assessment basis of taxation became effective for all tax years starting March 1 1999. Part of the self-assessment system is that the employer should withhold employees’ tax (PAYE) on a final deduction basis so that the employee has no further tax liability.For purposes of the self-assessment system, individual taxpayers have been classed into three groups. One group consists of those taxpayers who work for the same employer throughout the tax year (the period March 1 to February 28 the following year), earn interest for the tax year amounting to less than N$500 and who are not entitled to any deduction (such as travel or entertainment expenses) from the income earned for the tax year.This group must submit their tax returns (currently a brown form) by June 30 each year if they receive a tax return from the Receiver of Revenue.In terms of the self-assessment system, the employer should withhold and pay over the employee’s tax for the year.If any tax is payable, it must be paid within 60 days after the date of the tax assessment.The second group of taxpayers are those that are entitled to deduct expenses from allowances they receive as part of remuneration, or who work for more than employer during the tax year, or who receive interest in excess of N$500 interest during the tax year.This group must submit their tax returns (currently a blue form) by June 30 each year.The tax return must include a calculation of the tax payable (from there the term self-assessment) and the amount of tax payable must be paid on or before June 30.The third group of taxpayers can be described as those who are self-employed or receive income from carrying on a trade in addition to their salary income.These taxpayers must submit their tax returns (currently a yellow form) by September 30 each year.They are required to perform the self-assessment calculation and pay the tax owing by September 30.The Receiver of Revenue can, upon receiving your written request, grant you extension of time to submit your income tax return.Although you can also obtain extension of time to pay your income tax liability if you are not able to pay your tax by the due date, this will come at a cost.The Receiver of Revenue will impose interest on the late payment of the tax at a rate of 20 per cent calculated daily and compounded monthly.This interest rate is an exceptionally heavy penalty for not being able to pay on time when compared to the current overdraft interest rate of 12,25 per cent charged by commercial banks.Even if you receive no tax return from the Receiver of Revenue, the obligation is on you to obtain a tax return from the Receiver in terms of section 56(7) of the Income Tax Act and then to comply with the other provisions regarding the submission of the tax return and payment of income tax. The self-assessment system is far too complicated for the average taxpayer in Namibia and the Receiver of Revenue will be well advised to educate taxpayers to ensure they at least know what is expected from them.Many taxpayers, rightly or wrongly, plead ignorance when it comes to the self-assessment system.The fact is that the Receiver of Revenue expects us to know the requirements of the law and to comply with it.In recent weeks the Receiver of Revenue has held workshops around the country to inform taxpayers about tax matters and hopefully these basic issues were covered at these meetings.* Should readers have queries, they are invited to send them to cameron.kotze@za.ey.com