The tax treatment of interest earned from a unit trust depends on who receives the income and where the interest originates.
Individuals and trusts
For Namibian individuals and trusts, local interest earned through a unit trust is generally subject to 10% withholding tax under the Namibian Income Tax Act.
The unit trust manager deducts the tax before paying the interest to the investor.
For these investors, the 10% withholding tax is generally treated as a final tax, meaning no additional Namibian income tax is payable on that interest.
Investors should receive a consolidated income tax statement showing the interest earned and any tax withheld. Certain categories of interest may be exempt from tax, depending on the source of the interest.
Companies
Namibian companies are treated differently.
The 10% withholding-tax mechanism applicable to individuals and trusts does not generally apply to companies receiving unit trust interest.
Instead, the interest forms part of the company’s taxable income and is taxed under the normal corporate income-tax rules.
Foreign interest
Where a unit trust earns interest from investments outside Namibia, the tax treatment can differ because the income has a foreign source.
The Namibian unit trust manager may not withhold Namibian tax on that foreign interest.
The country where the interest originates may, however, impose its own tax or withholding tax.
Where applicable, the double taxation agreement between Namibia and the source country may affect how the income is taxed and whether foreign tax credits or reduced withholding rates apply.
