Section Assessed Losses and Tax Laws - How Does It Work?
This article will count 0.25 units (15 minutes) of unverifiable CPD. Remember to log these units under your membership profile.
From 1 January 2024, the way assessed losses are handled under Namibia’s Income Tax Act has changed, and it’s important to understand how these changes could affect your clients' tax returns and long-term planning.
⚖️The Key Changes to Section 21
The Income Tax Amendment Act, 2024 (published in Government Gazette No. 8442 on 16 September 2024) introduced two key changes to Section 21 of the Income Tax Act, 1981. Let’s walk through what’s new, what it means in practice, and what to watch for on ITAS.
💸Your assessed loss to offset may be limited
For assessed losses carried forward less than N$1 million there is no impact as the full value of the loss can be set off against taxable income.
Where you generate taxable income in the year amounting to less than N$1 million you can set off your tax losses in full against the income.
Businesses are now only allowed to offset assessed losses against taxable income up to the greater of:
NAD 1 million, or
80% of taxable income for the year
This means if a business has large assessed loss (over NAD 1 million) that is carried forward, it can still end up paying tax on 20% of its taxable income.
📅Time limit to use assessed losses
Previously, assessed losses could be carried forward indefinitely. That’s no longer the case:
Most taxpayers can now only carry forward assessed losses for 5 years
Certain industries (like mining, petroleum, and green hydrogen projects) get 10 years, but they’ll need to meet criteria set by the Minister.
Any assessed loss accumulated before 1 January 2024 can still be carried forward, but only for five years from that date, i.e., until 31 December 2028.
🔍 What It Means in Practice
Let’s bring this to life with some numbers:
🧾 Example 1: Taxable income below NAD 1 million
A Small rental company with taxable income of NAD 780,000 in the 2024 financial year. It also has assessed loss brought forward of NAD 1,306,430. How much assessed loss can the entity use in the financial year?
When applying the limits of section 21, the assessed loss that can be used in the 2024 financial year is the greater of NAD 1 million, or 80% of taxable income for the year. In this case it would be NAD 624,000 or NAD 1,000,000.
What happens with the remaining assessed loss? NAD 1,306,430 - NAD1,000,000 = NAD 306,430 may be carried forward (within the 5-year limit).
🧾 Example 2: High-income taxpayer
A medium-sized consultancy firm has taxable income of NAD 2,000,000 with assessed loss carried forward of NAD 1,500,000.
80% of income = 2,000,000 × 80% = NAD 1,600,000
Since the assessed loss (NAD 1,500,000) is less than 80% of the taxable income, the full amount can be offset in this financial year. Tax will be payable on the remaining taxable income = 2,000,000 - 1,500,000 = NAD 500,000. The entire assessed loss is used up so there will carry forward to the following year.
🛠️ How will this work on ITAS?
NamRA has not yet issued formal guidance on how the new rules will be reflected on ITAS. NamRA announced a further extension for the submission of Income Tax Returns in line with Section 21 of the Income Tax Act, now due by 31 October 2026. All tax returns that need to take into account the limitation of losses can therefore be held back for now. However, payment still needs to be made on time. It is expected that the system will allow you to apply the 80% or NAD 1 million rule. It is important that you manually limit the assessed loss applied in the calculation of your taxable income and track expiry dates of pre-2024 losses to ensure none are carried beyond the 5-year mark.
💡 Watch out for ITAS updates and NamRA guidance closer to the September 2025 filing deadline for FY2024 returns.
✅ What accountants should do now
Update your clients' loss schedules to include expiry dates for pre-2024 losses
Review tax estimates for the 2024 year to factor in the 80% rule
If you have clients in long-term sectors (like mining), check if they qualify for the 10-year rule
Educate clients that even if they’ve made big losses in the past, they’ll likely be paying tax sooner than expected.
