Namibia, Republic of

Income tax amendments

The following income tax amendments were gazetted on 16 September 2024 and are effective for all companies with financial years commencing on or after 1 January 2024:

• The corporate income tax (CIT) is reduced to 31%. There is a further reduction in the CIT rate for companies whose financial years will commence on or after 1 January 2025 to 30%.
• Youth internship allowance: Section 17E was inserted into the Income Tax Act providing for a youth internship allowances that employers can claim in addition to their actual cost deductions, provided there is a registered internship agreement.
  
  The following should be noted:
  • The allowance is calculated based on a formula. The formula as published in the Gazette has an error, and applying the formula as currently gazetted amounts to (unintended) significant allowances being claimable. We understand the Ministry of Finance is in the process of revising the formula, but no formal communication has been received in this regard.
  • From communication with the Ministry of Finance, we understand that the formula should be read and applied as follows:
    
    (A/B) * C - C
    
    Whereas:
    
    ‘A’ represents 50%
    
    ‘B’ represents the CIT rate (31%), and
    
    ‘C’ represents the costs incurred per annum or 50,000 Namibian dollars (NAD), whichever is the lesser.
  • The allowance is claimable for up to 36 months and should be claimed pro rata in the instance where the registered internship agreement is less than 12 months.
• Section 21 now limits the carry forward of assessed tax losses, both in terms of the amount to be carried forward and the period for which the assessed loss can be carried forward, as follows:
  • Amount to be carried forward: The set off against taxable income of the balance of assessed loss incurred by the taxpayer in any previous year that has been carried forward from the preceding year of assessment is now limited to NAD 1 million or 80% of taxable income, whichever is the greater, before taking into account the provisions of Section 21 or Section 36 of the Income Tax Act.
    
    This means that if the taxpayer has taxable income of less than NAD 1 million, the full prior year tax loss can be carried forward and can be used to set off against the current year’s taxable income.
  • Number of years: Assessed losses will not be allowed to be carried forward for a period exceeding five years in respect of any taxpayer, or ten years in respect of entities in the mining, petroleum, or green hydrogen industries. It is important to note that temporary discontinuance in the carrying on of your trade will not affect the five/ten years limit.
    
    The balance of assessed loss accumulated before 1 January 2024 can be carried forward for five/ten years.
• Short-term and long-term insurance entities are no longer exempt from non-resident shareholders tax (NRST).
• The term ’connected person‘ is now defined as “any person…has control over another person, or where both persons are under control of the same person…”. The definition includes an extensive list of when persons will be regarded as being ‘connected’ for purposes of Section 95A and also provides for instances when a person will be regarded as having ‘control over another person’.
• The 3:1 debt-to-equity ratio requirement in determining thin capitalisation is replaced with a fixed limitation on interest deductions to the extent that the net interest expense exceeds 30% of the connected person’s tax earnings before interest, taxes, depreciation, and amortisation (EBITDA) and the net interest expense exceeds NAD 3 million (i.e. if the net interest expense does not exceed NAD 3 million, this limitation will not apply.
  • The terms ‘interest’, ‘net interest expense’, ‘tax amortisation’, ‘tax depreciation’, and ‘tax EBITDA’ for purposes of the limit on the interest deduction are defined.
  • Interest deductions not allowed for the current year are allowed to be carried forward for five years in respect of any taxpayer and ten years for entities involved in mining, petroleum, or green hydrogen industries.
  • The section applies to the Petroleum Taxation Act; however, banking institutions and registered insurers/re-insurers are exempt.

Value-added tax (VAT) amendments

Some major changes were introduced by the VAT Amendment Act, 2024, published 16 September 2024. These amendments take effect on the first day of the second month following the publication of the Amendment Act, 2024 (i.e. on 1 November 2024):

• The compulsory VAT registration threshold is increased from NAD 500,000 to NAD 1 million.
• The total minimum consideration amount, as per Section 21, when a VAT-registered supplier shall not be required to provide a tax invoice for the provision of a taxable supply, increased to NAD 1,000.
• The time of supply rule in relation to import VAT on services changed to 20 days after the date of import of the services.
• The interest rate levied on:
  • overdue tax payments changed from 20% to the prime lending rate announced by the Bank Namibia, and
  • VAT refunds due to the taxpayer changed from 11% to the repo rated as announced by the Bank Namibia.