May 29, 2020
Namibia issues 2020 Budget
Namibia’s 2020 budget speech was delivered by the Honorable Minister of Finance, Mr. Impumbu Shiimi, on 27 May 2020.
No new tax proposals were made by the Minister in light of the challenging economic landscape.
The Minister reiterated Inland Revenue’s ongoing efforts to ensure all Namibians earning income above the tax paying threshold pay their fair share of tax as well as the implementation of measures to address tax planning and tax avoidance opportunities.
The Minister also addressed tax proposals previously announced and explicitly withdrew the proposal to disallow the tax deductibility of royalties for mining entities to encourage investor confidence. He confirmed the introduction of Special Economic Zones, subsequent to the repeal of the tax exemptions on corporate income tax for Export Processing Zone (EPZ) entities and the tax incentives for registered manufacturers and exporters of manufactured goods. The Minister also confirmed that these changes are set for implementation starting this year and will include certain grandfathering provisions. Although no further details were provided, the explicit mention of grandfathering provisions suggests that current registered EPZ entities and registered manufacturers may continue to enjoy certain benefits under the repealed legislation under certain circumstances.
Other previously announced income tax and value-added tax (VAT) proposals, such as the dividend tax for residents, the changes to the basis of the taxation of trusts, the taxation of income derived from commercial activities of charitable, religious, and educational institutions exempted from income tax under Section 16 of the Income Tax Act, the introduction of VAT on income of listed asset managers, VAT at the standard rate on supplies of sugar and others, are still under review by the Ministry. The Minister confirmed that further stakeholder consultations will take place regarding these proposed changes.
The Minister mentioned that the scope of the export levy may be expanded after consultation to include specific agricultural, forestry, game products and other mining products currently not covered. The current export levy for forestry products, payable in percentage rates, may be amended to a levy based on a Namibia Dollar rate per kilogram, to prevent undervaluation of forestry products such as timber.
The Minister did not mention the national ”sin” tax on alcohol and tobacco products which was proposed last year but confirmed that increased excise duties were effective from 27 February 2020 and that a notice to that effect will be tabled in Parliament in due course.
Companies and close corporations
The corporate tax rate for non-manufacturing and non-mining companies remains unchanged at 32%.
The rate of tax payable by hard rock mining companies and companies rendering services in connection with mining on behalf of a person licensed to conduct hard rock mining operations remains unchanged at 37.5%.
The rate of tax payable by diamond mining companies and companies rendering services in connection with mining on behalf of a person licensed to conduct diamond mining operations remains unchanged at 55%.
The basic rate of tax payable by oil and gas extraction companies remains unchanged at 35%. These companies are also subject to an additional profits tax that is calculated in terms of a formula contained in the Petroleum Taxation Act.
Individuals and trusts
The maximum marginal rate for the year of assessment ending 28 February 2021 remains unchanged at 37% and applies to taxable income in excess of N$1,500,000. The minimum tax threshold remains unchanged at N$50,000. The detailed tax rates are set out in the table below.
The following withholding taxes are payable on qualifying payments to nonresidents:
A double tax agreement may reduce the withholding tax rate applicable to the various tax rates indicated above.
The VAT registration threshold remains at N$500,000. Set criteria apply to voluntary VAT registration and VAT import accounts.
Transfer duty rates payable on the transfer of fixed property including mining rights by individuals are as set out below.
Transfer duty is payable at a rate of 12% by any person other than a natural person on the transfer of fixed property including mining rights.
For additional information with respect to this Alert, please contact the following:
Ernst & Young Namibia, Windhoek
Ernst & Young Namibia, Walvis Bay
Ernst & Young Advisory Services (Pty) Ltd., Africa ITTS Leader, Johannesburg
Ernst & Young Société d’Avocats, Pan African Tax – Transfer Pricing Desk, Paris
Ernst & Young LLP (United Kingdom), Pan African Tax Desk, London
Ernst & Young LLP (United States), Pan African Tax Desk, New York