Final withholding tax introduced
THE Minister of Finance tabled the Income Tax, Value-Added and Stamp Duty Bills in the National Assembly last week. These bills have not been finally approved and gazetted as law yet.
The sale, donation, expropriation, cession, grant, transfer or other alienation of a licence or a right to mine minerals in Namibia, irrespective of where the transaction will be concluded, the place where payment for the transaction will be made or the place where the funds from which payment is made are held, will become taxable in Namibia.
Similarly, the sale of shares in a company that holds a licence or has a right to mine minerals in Namibia will become taxable.
When the Minister made her initial announcements (in July and August 2011) it appeared as if this provision may also apply to the sale of rights in other natural resources. The Income Tax Amendment Bill has now clarified this aspect, as this provision will only be applicable to mining for minerals. Fishing rights, for example, will not fall within the ambit of this provision.
The provision will likely be applicable to individuals from 1 March 2012 and for companies from tax years commencing on or after 1 January 2012.
A final withholding tax of 25% will be introduced where:
? A Namibian resident pays any amount to a non-resident sportsperson, a non-resident musician, a non-resident entertainer involved in cabaret, motion picture, radio, television or theatre. The withholding tax will also be applicable to any payment made to any other non-resident person in relation to the activities mentioned above;
? Where a Namibian resident pays any fee to a non-resident person for any administrative, managerial, technical or consultative services or any similar services, whether such services are of a professional nature or not; and
? Where a Namibian resident pays any director?s fee to a non-resident person.
A ?non-resident person? will be defined as a person (other than a company) not ordinarily resident in Namibia or carrying on business in Namibia or a company not managed and controlled in Namibia. A person will also be deemed to be a non-resident if the payment is made to an address outside Namibia, unless proven otherwise.
The withholding tax provision will apply whether or not the services are performed inside or outside Namibia. The tax withheld must be remitted to Inland Revenue, together with a prescribed form, within 20 days after the end of the month during which the amount was deducted or withheld. Failure to withhold and late payment will attract additional taxes, penalties and interest.
This provision will likely be applicable to individuals from 1 March 2012 and to companies from tax years commencing on or after 1 January 2012. The withholding tax rate on dividends payable to non-resident shareholder (?NRST?) will increase from 10% to 20%, where the non-resident shareholder holds less than 25% of the share capital of the Namibian company paying the dividend.
Where the shareholder holds more than 25% of the Namibian company?s share capital the NRST rate will remain at 10%. The NRST rate may be reduced by a double taxation agreement, if one was concluded with the country in which the shareholder is resident.
For example the Namibian/South African double tax agreement reduces the NRST rate to 5% where the South African shareholder holds at least 25% of the Namibian company?s capital and to 15% in all other cases.
This provision will likely be applicable to companies from tax years commencing on or after 1 January 2012. Some changes will be made to the recoupment provision by which the option to approach the Minister to use an amount lesser than the market value will be removed.
The Minister was normally approached for the use of a lower than market value where assets were, for example, sold intra-group. This change will likely be applicable to individuals from 1 March 2012 and to companies from tax years commencing on or after 1 January 2012.