DIRECTORATE TAX POLICY UNIT (TPU)

The Tax Policy Unit (TPU) is responsible for advising the Minister of Finance on tax policy issues. As part of this role, TPU must design tax instruments that can optimally fulfil a revenue-raising function and grow the economy. These tax instruments must be aligned to the goals of government’s economic and social policy.

These instruments are then administered by NAMRA.

Namibian tax system

Namibia has a source-based income tax system. Residents and non-resident are taxed on their income from a Namibian sourced, subject to certain exclusions. Non-residents can have relief under Double Taxation Agreements.

Personal Income Tax (PIT)

PIT is one of government’s main sources of income. Income tax is levied on residents’ source income, with appropriate relief to avoid double taxation. Non-residents are also taxed on their income from a Namibia source.

Tax is levied on taxable income that, in essence, consists of gross income less exemptions and allowable deductions.

Individuals generally receive most of their income as salary/wages, pension/ retirement payments and investment income (interest and dividends). Some individuals may also have business income which is taxable as personal income (for example, sole proprietors and partners).

Corporate Income Tax (CIT)

CIT is a tax imposed on companies resident in Namibia, which are incorporated under the laws of, or which are effectively managed in, the country, and which derive income from within the country. Non-resident companies which operate through a branch or which have a permanent establishment within Namibia are subject to tax on all income from a source within the Namibia.

Companies operating in the resources sector are subject to a higher CIT rate.

Transfer Duty

Transfer Duty is a tax levied on the value of any property acquired by any person by way of a transaction or in any other way. For the purpose of Transfer Duty, property means land and fixtures and includes real rights in land, rights to minerals, a share or interest in a “residential property company” or a share in a share-block company. All conveyancers are required to register with NAMRA.

Value-Added Tax (VAT)

VAT is an indirect tax on the consumption of goods and services in the economy. Revenue is raised for government by requiring a business, that carries on an enterprise to register for VAT. In doing so, the business will charge VAT on supplies of goods and services made by it, on the importation of goods and on imported services (subject to certain conditions).

The business will also be entitled to deduct any VAT charged to it, or under limited circumstances from a business that is not registered for VAT, in respect of a supply made to it. VAT is therefore non-cumulative, meaning that a credit/ deduction is allowed for VAT paid in previous stages, within the production and distribution chain.

The business is required to pay the difference between the VAT charged by it and the VAT charged to it, or claim a VAT refund where the VAT charged to it exceeds the VAT charged by it.

VAT is therefore, charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services.

It is compulsory for a person to register for VAT if the value of taxable supplies made or to be made, is in excess of N$1 million in any consecutive 12 month period.

The standard rate of VAT is 15%, and there is a limited range of goods and services which are subject to VAT at the zero rate or are exempt from VAT.

Southern African Customs Union (SACU)

SACU consists of Botswana, Lesotho, Namibia, South Africa and Eswatini. The SACU Secretariat is located in Windhoek, Namibia. SACU was established in 1910, making it the world’s oldest Customs Union. Negotiations to reform the 1969 Agreement started in 1994, and a new agreement was signed in 2002.

The member states form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the member states for products originating in these countries; and there is a common external tariff that applies to non-members of SACU.

Excise duties are levied on certain locally manufactured goods and their imported equivalents. Specific excise duties are levied on tobacco and liquor products. Ad valorem excise duties are levied on products such as motor vehicles, cellular telephones, electronics and cosmetics.

Customs duty

Customs duties are imposed by the Customs and Excise Act of 1964. Ordinary customs duty is a tax levied on imported goods and is usually calculated on the value of goods imported and collected by the customs unit within NAMRA & SARS.

Member States' annual revenue shares are determined and approved by Council in December for distribution during the subsequent year.

The current Revenue Sharing Formula has three components; namely the Customs Component, Excise Component and the Development Component. The Customs share is allocated on the basis of each country's share of intra-SACU imports. The Excise Component is allocated on the basis of each country's share of Gross Domestic Product (GDP). The Development Component, which is fixed at 15 percent of total excise revenue, and is distributed according to the inverse of each country's GDP per capita.

Treaty Negotiations and Participation in International Tax Fora

International tax law expertise is needed for dealing with international taxation, such as negotiating bilateral tax treaties, considering appropriate source rules, anti-avoidance rules (thin capitalization and controlled foreign company rules), and transfer pricing. Ideally, this process requires knowledge about the costs and benefits of certain provisions in a tax treaty, calling for specific data analysis by the TPU on such issues.

Governance and placement

Placing the responsibility for the tax policy function within the Ministry of Finance—as opposed to the revenue administration—has two main advantages. First, it is consistent with the Ministry of Finance’s general responsibilities for fiscal policy and macroeconomic management. Indeed, TPUs located in the Ministry of Finance are often part of a wider fiscal policy unit that formulates both tax and expenditure policy.

A second advantage of locating a TPU in the Ministry of Finance instead of the revenue administration is that the latter may be naturally more risk-adverse to policy changes (especially if they are frequent) that necessitate substantial adjustments to administrative and information technology systems.