For many people Namibia is associated with isolated landscapes rocky mountains and the Namib dessert but in this vast and beautiful country, there are hidden sand dunes of opportunities, especially with the trust figure as a holistic estate planning tool. The Namibian trust law is, compared to South Africa, a bit like “back to the future” in that the Trust Monies Protection Act of 1934, which was repealed in South Africa in 1989, is still applicable in Namibia. It is this relative uncomplicated system also in respect of the tax dispensation, which appeals to the informed.
In South Africa the Trust Property Control Act of 1988 was introduced as from 31 March 1989 and although it was supposed to improve the RSA trust legislation, history is revealing some important deficiencies.
As a holistic estate planning tool the trust will not only serve the purpose of one sub-plan ie to save tax as part of the tax plan but also to serve as the necessary protection against financial and other risks as part of the estate owner’s risk protection plan. By using in Namibia (and the RSA) the correct trust structures the very much neglected family relationship plan in most persons’ estates can also be properly attended to as part of their holistic estate plan. This is done by acknowledging the diversity in needs of children and all person in the families and addressing it with not just one trust fits all models as is often the case, the latter which easily lead to sad and costly family feuds.
The Common Law of Namibia applicable to trusts is the same as for South Africa and therefore the trust creation and administration as well as the powers and duties of trustees are the same, save for some adaptations in respect of local Namibian legislation. As in the RSA the typical discretionary trust can also be created in Namibia by a small donation of say N$100 (more than a N$1000 will require specific formalities) to the trustees whereby the beneficiaries then possess merely a hope to receive benefits from the trust via the exercising of their discretion by the trustees. In this way the trust is the ideal protective vehicle for the beneficiary who may find him- or herself in financial difficulties or who is experiencing risks because of relationship problems.
The tax dispensation in Namibia regarding trusts, are rather simplistic and, save for a 12% transfer duty rate when acquiring fixed property by a trust or non-natural person, also quite attractive for property investment in a trust. Amendments to the Transfer Duty Act were proposed to include transfer duty on the sales of shares/members interest in property/mining right-owning entities and are expected to be tabled during 2015/16. Stamp duties is levied on certain property transactions and is payable at N$12 for every N$ 1 000 or part of the value of the immovable property where purchased by a juristic person or a trust. However, none of the debates (and uncertainty) currently going on about the taxation of trusts in the RSA after the publication of the Davis Tax Committees Interim Report on Estate Duty is heard or relevant to Namibia which is very conducive of protecting and growing wealth in the country.
Due to the fact that Namibia does not have estate duty there is thus no need for donations tax. There is also no capital gains tax in Namibia, Trusts are for income tax purposes treated similar to that of a natural human being and taxed according to a sliding scale from 18% to 37% with the common law conduit principle applying whereby income can flow through in die particular year of assessment to the beneficiaries of the trust to be taxed in their (the beneficiaries’ hands) according to the tax rate applicable to the beneficiary.
The trust figure and as an entity is as useful and versatile in Namibia as can be anywhere else in the world. The wrong perception is however that because of the absence of estate duty (which is so often wrongly associated with the only use of trusts) estate owners do not really need trusts. The contrary is however developing and the interest for the use of trusts for non- tax and non-estate duty purposes, is being discovered by locals and abroad who is interested in investing in Namibia and contributing to the wealth of all its peoples. Namibia can therefore still trust their trusts.
*Prof Willie van der Westhuizen on a regular basis presents seminars in Namibia inter alia to the Law Society of Namibia and other advisors and recently spoke at a conference of fiduciary specialists in Windhoek.