Namibia, Republic of

Foreign tax credit

A tax credit may be claimed in Namibia for foreign taxes paid on dividends, royalties, and similar income, limited to the amount of tax payable in Namibia. Proof of the taxes paid in the foreign jurisdiction should be provided to Inland Revenue in order to claim the tax credit.

The claiming of foreign tax credits only applies to countries with which Namibia has a DTA.

Manufacturing

The following is a high-level comparison of the different tax treatments for normal companies and registered manufacturing companies. This description does not consider the specific conditions that should be met in order for these incentives to be utilised. 

Certain existing preferential treatments granted in respect of registered manufacturers is in the process to be phased out.  This will apply to all taxpayers (not only registered manufacturers) that export manufactured goods and who were previously allowed to claim an export sale allowance.

The special tax incentives granted to registered manufacturers in terms of Section 17A (Remuneration and training allowance), 17B (Export marketing allowance) and 17D (Land-based transportation allowance) prior to 31 December 2021 will continue to apply up to the end of five years. Taxpayers who benefit from the export allowance in terms of Section 17C will have a grace period of five years before their incentive lapses.  

It also includes the insertion of Section 101A “Repeal of certain provisions of Export Processing Zone Act, 1995”, the phasing out of tax exemptions pertaining to certain traders. 

Note that only the building allowance and preferential tax rate (as set out below) may create or increase a tax loss.

Building allowance

A building allowance is deductible with respect to buildings used for purposes of trade.

For normal companies, the allowance is calculated as 20% of the cost of erection in the year in which the building enters service and 4% during the 20 years that follow.

For registered manufacturing companies, the allowance is calculated as 20% of the cost of erection in the year in which the building enters service and 8% during the ten years that follow.

Employee cost allowances

For normal companies, expenditures for remuneration and training of employees are deductible for tax purposes.

For registered manufacturing companies, an additional allowance of 25% of remuneration and training of employees that are directly engaged in the manufacturing process are deductible. However, this allowance may not create or increase a tax loss. Deductions sought for training should be approved by the government.

Export expenditure allowance

For normal companies, export expenditures incurred are deductible for tax purposes.

For registered manufacturing companies, an additional allowance of 25% of costs incurred in an export country, in order to export Namibian manufactured goods to such country, may be deducted. However, this allowance may not create or increase a tax loss.

Export allowance

Any taxpayer (not required to be a registered manufacturer) that derives income from the export of goods manufactured in Namibia, excluding meat or fish, may deduct an export allowance equal to 80% of the taxable income derived from the export of manufactured goods.

Gross profit derived from the export of manufactured goods as a percentage of total gross profit should be used to determine the percentage of taxable income that is used to calculate the export allowance. However, this allowance may not create or increase a tax loss.

Transport allowance

For normal companies, land-based transport costs (i.e. transport by road or rail) are deductible for tax purposes.

For registered manufacturing companies, an additional allowance of 25% of land-based transport cost in respect of material and components used in the manufacturing process or equipment imported for direct use in the manufacturing process may be deducted. However, this allowance may not create or increase a tax loss.

Preferential tax rate

The normal tax rate for companies other than mining companies or registered manufacturers is 31% (for all entities having a financial year starting on or after 1 January 2024.

The tax rate for a registered manufacturer for taxable income with respect to the manufacturing activity for which they are registered is 18%. Generally, this preferential rate is applicable for a period of ten years from registration as a manufacturer, however, note the phasing out of all preferential treatments for registered manufacturers discussed above. 

Export Processing Zones (EPZs)

In order to become an EPZ company, a particular entity must register with the EPZ governing body and obtain approval from the Namibian Revenue Agency

An EPZ company qualifies for the following benefits:

• The company is exempt from corporate tax.
• No VAT is payable on the sale of goods or services rendered in the zone.
• No VAT is payable on goods imported or manufactured in the zone.
• No customs or excise duty is payable on goods imported into the zone.
• No stamp duty or transfer duty is payable in relation to the transfer of movable or immovable property in the zone.
• A 75% refund of expenditures incurred in training Namibian citizens.
• Some of the provisions in the Labour Relations Act do not apply in the zone.

Enterprises must comply with the following requirements in order to qualify for EPZ status:

• Goods must be exported to countries other than countries in the SACU.
• Industrial employment must be created or increased.
• Namibia's export earnings must be increased as a result of manufactured goods exported.

EPZ companies may not be involved in retail business operations.

On 19 February 2020, the Minister of Finance tabled the Income Tax Amendment Bill 2020 in Parliament. The Bill includes an insertion of Section 101A 'Repeal of certain provisions of Export Processing Zone Act, 1995', which includes the phasing out of tax exemptions pertaining to certain traders. With the enactment of this bill, EPZ entities would be liable for income tax, stamp duties on goods and services required for EPZ activities, as well as transfer duties in respect of the acquisition of any immovable property situated in an EPZ. The enforcement of Section 101A in the Income Tax Act (no. 24 of 1981) will be determined and come into effect on a date to be determined by the Minister, by notice in the Government Gazette.