Namibia VAT, GST, and Sales Tax Guide

Namibia

Windhoek GMT +1

EY Street address: Mail address: Cnr Otto Nitzsche and Maritz Streets P.O. Box 1857 Klein Windhoek Windhoek Windhoek Namibia

Indirect tax contacts

Cameron Kotzé +264 (61) 289 1112 cameron.kotze@za.ey.com

Nikia Bauernschmitt +264 (61) 289 1276 nikia.bauernschmitt@na.ey.com

Friedel Janse Van Rensburg +264 (61) 289 1211 friedel.janse.van.rensburg@na.ey.com

A. At a glance

Name of the tax

Value-added tax (VAT)

Local name Value-added tax (VAT)

Date introduced 27 November 2000

Trading bloc membership Southern African Customs Union (SACU) Southern African Development Community (SADC) African Continental Free Trade Area (AfCFTA)

Administered by Namibian Revenue Agency (NamRA)

VAT rates

Standard 15% Other Zero-rated (0%) and exempt

VAT number format 0123 4567

VAT return periods Bimonthly

Thresholds

Registration Annual taxable supplies of NAD500,000

Voluntary Reasonable expectation that future taxable supplies will exceed NAD200,000 in a 12-month period

Recovery of VAT by non-established businesses Yes (subject to certain conditions)

B. Scope of the tax

VAT applies to the following transactions:

• The supply of goods or services made in Namibia by a registered person

• Reverse-charge services received by a person in Namibia that is not entitled to claim full input tax credits (referred to as imported services)

• The importation of goods from outside Namibia, regardless of the status of the importer

Goods imported from countries in the Southern African Customs Union (Botswana, Eswatini, Lesotho, Namibia and South Africa) are not subject to customs duty but are subject to import VAT.

Please note that the term “taxable person” is not used in the Namibian VAT Act, and instead “registered person” and “taxpayer” are used.

C. Who is liable

A VAT-registered person is required to account for output tax on all goods and services supplied unless the supply is specifically exempted by the VAT Act. Exempt supplies are specified in Schedule IV to the VAT Act.

A VAT-registered person is a person (business entity or individual) carrying on an activity in Namibia or partly in Namibia on a continuous or regular basis if, in the course of the activity, goods or services are supplied to another person for consideration exceeding the registration threshold or who has voluntarily registered for VAT. This includes persons who are registered for VAT in Namibia as well as persons who are required to register for VAT.

A person is required to register for VAT if the value of taxable supplies exceeds (or is expected to exceed) NAD500,000 in any consecutive 12-month period.

A VAT registration only becomes effective from the first calendar day of the month after registra tion was approved. The earliest the registration can become effective is the first day of the calendar month following the month in which application for registration was filed.

In addition to actual goods and services supplied by a registered person, the VAT Act also deems certain supplies to be supplies of goods or services. The person making the deemed supply is liable to pay VAT. Deemed supplies include the following:

• Ceasing to be a registered person

• Short-term insurance indemnity payments

• Change in use

• Acquisition of used goods (excluding immovable property) from a person not registered for VAT

Goods imported into Namibia are subject to import VAT. The import VAT is payable at the time of import unless the importer has obtained approval from the Directorate of Namibian Revenue Agency (NamRA) to maintain a VAT import account, in which case the payment of the import VAT can be deferred and paid when the import VAT return is due for submission (see Section I). The Commissioner may require security or impose additional conditions before registration of a VAT import account.

Exemption from registration. The VAT law in Namibia does not contain any provision for exemption from registration if the value of taxable supplies made exceeds the registration threshold of NAD500,000 in a 12-month period.

Voluntary registration and small businesses. A person whose turnover is below the compulsory registration threshold may register for VAT on a voluntary basis provided that there is a reason able expectation that taxable supplies will be made for consideration after a period of time and that there is a reasonable expectation that future taxable supplies will exceed NAD200,000 in a 12-month period.

Group registration. Group VAT registration is not allowed in Namibia.

Non-established businesses. A “non-established business” is a business that has no fixed estab lishment in Namibia. A non-established business that makes taxable supplies of goods or ser vices continuously or regularly in Namibia must appoint a tax representative and open a Namibian bank account to register for VAT.

Tax representatives. Persons who make supplies in Namibia may appoint a representative who is responsible for registration and payment of VAT on behalf of the registered person. Tax representatives are appointed by taxpayers or legally appointed, e.g., public officers of companies,

treasurers of local authorities and unincorporated bodies, liquidators of companies in liquidation, guardians of legally disabled persons, agents appointed by the Commissioner for nonresidents, executors of deceased estates and trustees of insolvent or trust funds. Tax representatives are responsible for performing the duties under the VAT Act of the persons they represent.

Reverse charge. Recipients of services who make exempt supplies are liable to pay VAT on imported services, subject to specific provisions. Imported services are exempt from VAT if the services are specified in Schedule IV of the VAT Act. Exempt imported services include, but are not limited to, financial services, public transport services, medical services and educational services as defined. See the section below on Rates for more detail.

Domestic reverse charge. There are no domestic reverse charges in Namibia.

Digital economy. There are no special rules for the taxation of the digital economy in Namibia. There is no requirement for nonresidents that provide electronically supplied services to register for VAT in Namibia. Only where services are rendered in Namibia or partly within Namibia will a liability to register and account for VAT arise. Recipients of services who make exempt supplies are liable to pay VAT on imported services.

For business-to-business (B2B) and business-to-consumer (B2C) transactions, the non-established business will only be liable to register for and levy VAT on the supply if it carries on a taxable activity in Namibia or partly within Namibia. To the extent that the customer is registered for VAT, VAT paid on invoices can be claimed as an input tax deduction. To the extent that the non-established business will not be liable to register for and levy VAT, no VAT liability will arise unless the customer makes exempt or mixed (taxable and exempt) supplies, in which case VAT on imported services will be payable by the customer on the inverse of its apportionment ratio.

There are no other specific e-commerce rules for imported goods in Namibia. VAT on imported goods is payable by the importer.

Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Namibia.

Registration procedures. The VAT registration application (VAT 1) must be completed and submitted to NamRA in hard copy. The person applying for VAT registration should have a Namibian bank account and a fitness certificate for the premises from which they will be conducting the taxable activity. The VAT registration, once approved by NamRA, becomes effective on the first calendar day of the second month after the registration letter was received from NamRA. On specific application the registration can become effective on the first calendar day of the month following the receipt of the registration confirmation.

Deregistration. A person may apply for deregistration if the value of such person’s taxable sup plies in a period of 12 months (begin on the date of application) will be less than NAD500,000 per year.

Changes to VAT registration details. A registered person shall notify NamRA in writing within 21 days of any change:

• Of the name, address, place of business, constitution or nature of the principal taxable activity

• Of address from which, or name in which, any taxable activity is carried on by the registered person

D. Rates

The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.

The VAT rates are:

• Standard rate: 15%

• Zero-rate: 0%

The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero rate or an exemption.

Examples of goods and services taxable at 0%

• Exports of goods and related services

• International transport of passengers and goods and related services

• Certain supplies of goods that are used exclusively in an export country

• Services supplied outside Namibia and to foreign branches and head offices

• Certain basic foodstuffs

• Supply of land to be used solely for residential accommodation purposes

• Supply of goods or services to erect or extend a residential building

• Supply of a business capable of separate operation as a going concern (provided all the require ments are met)

• Supply of goods subject to the fuel levy

• Supply of telecommunication services, electricity, water, refuse removal and sewerage to resi dential accounts

• Supply of livestock on the hoof

• Supply of intellectual property for use outside Namibia

• Supply of services to nonresidents subject to certain provisions

• Supply of goods or services to an export processing zone enterprise

The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.

Examples of exempt supplies of goods and services

• Financial services as defined

• Fare-paying public passenger transport

• Educational services

• Medical services provided by registered medical professionals

• Hospital services provided by registered hospitals

• Rental of residential accommodation

• Fringe benefits provided by an employer to employees

• Services supplied to members in the course of the management of a body corporate

• Supplies of goods or services to heads of state

• Supply of services by a trade union to or for the benefit of members if the supply is made from members’ contributions

Option to tax for exempt supplies. The option to tax exempt supplies is not available in Namibia.

E. Time of supply

The time when VAT becomes due is called the “time of supply” or “tax point.” In Namibia, the basic time of supply is the earlier of the issuance of an invoice or the receipt of payment.

Other tax points are used for a variety of transactions, including successive supplies like rentals, sale of fixed property, betting transactions, construction, supplies made from vending machines and “lay-by” sale agreements.

Deposits and prepayments. There are no special time of supply rules in Namibia for deposits and prepayments. As such, the general time of supply rules apply (as outlined above). Deposits will only be subject to VAT once it is applied as a consideration for a supply.

Continuous supplies of services. The tax point for continuous supplies is the earlier of the date on which payment is due or the date on which the invoice relating to the payment is issued.

Goods sent on approval for sale or return. There are no special time of supply rules in Namibia for supplies of goods sent on approval for sale or return. As such, the general time of supply rules apply (as outlined above).

Reverse-charge services. The import of services shall take place 30 days after the time of the import. The normal time of supply rules (as outlined above) will apply to the time of the import.

Leased assets. The supply of goods under rental agreements is deemed to take place at the earlier of when a payment becomes due or is received.

Imported goods. The tax point for imported goods varies depending on the source of the goods being imported. The following are the applicable rules:

• For goods that are imported from a member of the Southern African Customs Union – when the goods enter Namibia at the border post

• For goods imported from other countries – when the goods are cleared for home consumption

• For goods imported and entered into a licensed customs and excise storage warehouse – when the goods are cleared from the warehouse for home consumption

Periodic supplies. The tax point for periodic supplies is the earlier of the date on which payment is due or the date on which the invoice relating to the payment is issued.

Installment credit agreements. For installment credit agreements, the supply is deemed to take place at the earlier of when the goods are delivered or any payment of consideration is made.

Immovable property. The supply of immovable property is deemed to take place at the earlier of the following dates:

• The date on which the registration of the transfer is made in a deed’s registry

• The date on which any payment in respect of selling price is received (excluding deposits)

Supplies between related persons. The tax point for supplies of goods between related persons is when the goods are removed by or made available to the purchaser or recipient of the goods. The time of supply for supplies of services between related persons is when the services are per formed. For services such as management services, the tax point is at the end of each calendar month.

Supplies to a branch or main business outside Namibia. The tax point for goods consigned or delivered to a branch or main business outside Namibia is when the goods are consigned or delivered. The tax point for services supplied to a branch or main business outside Namibia is when the services are performed.

F. Recovery of VAT by taxable persons

A VAT-registered person may recover input tax (that is, VAT charged on goods and services supplied to it for business purposes) by deducting it from output tax (VAT charged on supplies made) provided the VAT-registered person is in possession of a valid tax invoice.

Input tax includes VAT charged on goods and services supplied in Namibia and VAT paid on the importation of goods.

The time limit for a taxable person to reclaim input tax in Namibia is three years. A late claim is therefore valid for three years from the end of the period in which the registered person was first entitled to claim the credit.

Nondeductible input tax. Input tax may not be recovered on purchases of goods and services that are not used for taxable purposes (for example, goods acquired for private use by an entrepreneur

or goods and services used for making exempt supplies). In addition, input tax may not be recov ered for specifically excluded business expenditure, such as entertainment.

Examples of items for which input tax is nondeductible

• Purchase or rental of a vehicle principally designed to carry nine or fewer seated people includ ing the driver (referred to as a passenger vehicle in the VAT Act)

• Business and staff entertainment, which includes accommodation, meals and beverages when traveling for business purposes

• Club subscriptions (excluding subscriptions to professional bodies)

• Acquisition of capital goods prior to being registered for VAT

Examples of items for which input tax is deductible (if related to a taxable business use)

• Purchase, hire and maintenance of vans and trucks

• Attendance at conferences and seminars

• Vehicle maintenance costs (including passenger vehicles, excluding if provided as fringe ben efit)

• Mobile phones (excluding if provided as fringe benefit)

• Air transport of goods within Namibia

• Aviation fuel

• Trading stock

• Raw materials

• Marketing expenditure

• Stationery

Partial exemption. Input tax directly related to the making of exempt supplies is not recoverable. If a taxable person makes both exempt and taxable supplies, it may recover only a portion of the input tax incurred. The direct attribution method is used to claim input tax if taxable and exempt supplies are made by a VAT registered person.

In Namibia, the deductible portion is determined using the following two-stage calculation:

• The first stage identifies the input tax directly attributable to taxable and exempt supplies. Input tax directly attributable to taxable supplies is deductible in full, while input tax directly related to exempt supplies is denied in full.

• The second stage identifies the amount of the remaining input tax (for example, input tax on general business overheads) that cannot be directly attributed to the making of taxable or exempt supplies. Such input tax may be deducted only to the extent that it relates to the making of taxable supplies. In general, the deductible portion is determined by comparing the value of taxable supplies to total supplies. However, a registered person may apply to the Directorate of NamRA for another equitable apportionment method (for example, apportionment based on floor space or activity), particularly if significant investment income, foreign-exchange gains or other nontaxable passive income is realized. The input tax ratio calculated for a financial year is applied to the following financial year and amended annually when a financial year comes to an end. A de minimis rule applies, and if taxable supplies are 90% or more of the total supplies, the full input tax deduction may be claimed and there will be no requirement to appor tion the input tax claim.

Approval from the tax authorities is not required to use the partial exemption standard method in Namibia. Special methods are allowed in Namibia, but subject to approval.

Banks must obtain approval from NamRA to apply the ratio for the following year.

Capital goods. Capital assets are defined in the VAT Act as any asset, or a component of any asset, that is subject to the deduction of capital allowances in terms of the Income Tax Act. The normal input tax recovery rules apply in respect of the acquisition of capital goods. Only the portion of

capital goods used to make taxable supplies can be claimed as an input tax deduction. The normal timing rules apply.

Refunds. If the amount of input tax recoverable in a period exceeds the amount of output tax payable in that period, a refund of the excess may be claimed.

Pre-registration costs. No VAT paid may be claimed prior to the effective date of registration unless it relates to trading stock or consumables on hand at the date the VAT registration becomes effective, and the goods were acquired within four months of the effective date of the VAT reg istration. The VAT paid in respect of the acquisition of capital goods prior to registration may not be claimed.

Bad debts. A registered person will be entitled to claim the VAT as an input tax deduction where bad debts have been written off. There should be proof that the registered person did in fact try to recover the bad debts before the VAT can be claimed back. The tax fraction will be applied to the total debt amount to the extent it includes VAT.

Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Namibia.

G. Recovery of VAT by non-established businesses

VAT incurred by businesses that are neither established nor registered in Namibia may be recov ered only with respect to goods that are subsequently exported from Namibia. A refund may be claimed from the VAT refund administrator. No claim may be made in respect of services (such as hotel accommodation and restaurant meals) consumed in Namibia.

H. Invoicing

VAT invoices. Registered persons are required to issue a tax invoice for all supplies made if the consideration (that is, the total amount received exclusive of VAT) amounts to NAD100 or more.

If the total amount in money for the supply is less than NAD100, the supplier may issue an abridged tax invoice. Only hard copy tax invoices qualify as valid tax invoices.

In order to claim input tax, the claimant must be in possession of a valid tax invoice for each supply including periodic supplies.

Credit notes. A tax credit note or debit note may be used to reduce VAT charged and reclaimed on a supply of goods or services. A credit note or a debit note may be issued only if the tax charged is incorrect or if the supplier has paid incorrect output tax as a result of one or more of the following circumstances:

• The supply has been canceled

• The nature of the supply has been fundamentally varied or altered

• The previously agreed consideration has been altered by agreement with the recipient of the supply

• All or part of the goods or services has been returned to the supplier

If a credit note adjusts the amount of VAT charged, it must be clearly marked “tax credit note” and must refer to the original tax invoice. It must briefly indicate the reason that it is being issued and provide sufficient information to identify the transaction to which it refers.

Electronic invoicing. Electronic invoicing is not allowed in Namibia. The Namibian VAT Act requires that all tax invoices be issued in hard copy.

Simplified VAT invoices. Simplified invoices are permitted in Namibia. There is no requirement to issue a tax invoice if the supply is for less than NAD100. A receipt is sufficient.

Self-billing. Self-billing is permitted, provided the Commissioner has provided prior written approval for the issue of tax invoices by a recipient. The recipient and the supplier must agree in advance that the supplier shall not issue any tax invoices where the recipient has issued a tax invoice in this regard. Then the tax invoice is provided to the supplier, and a copy thereof retained by the recipient.

Proof of exports. Exports can be classified as either direct exports or indirect exports. Direct exports (that is, the seller is responsible to deliver the goods at an address outside Namibia) can be zero-rated if the documentary requirements are met. The seller may not zero-rate exports if the goods are not delivered or consigned and delivered at an address in a country outside Namibia.

Documentation that must be retained to substantiate an export includes the following:

• The original customs export documentation (such as Form SAD500, Form 178 and any export certificate or certificate of origin)

• Commercial and tax invoices for the supply

These documents must be stamped by the customs and excise officials at the port of export.

The import documentation into the country of import may also be requested by the Directorate of NamRA in support of the export from Namibia.

Foreign currency invoices. In general, a tax invoice must be issued in the domestic currency, which is the Namibian dollar (NAD). If an invoice is issued in a foreign currency, the NAD equivalent must be determined using the appropriate exchange rate on the date on which the invoice is issued and must be reflected on the tax invoice.

Supplies to nontaxable persons. Full tax invoices are only required to be issued if requested by the purchaser. It is, therefore, not a requirement to issue full VAT invoices to private consumers; abridged tax invoices should be sufficient.

Records. Registered persons are required to maintain all tax invoices, tax credit and debit notes issued and received and import documents received, in English in Namibia. Accounting records can be maintained in a country other than Namibia if the records are maintained on a centralized computer system, which is linked to the registered person’s place of business in Namibia.

Record retention period. All records should be retained for a period of five years after the end of the tax period to which it relates.

Electronic archiving. The original tax invoices, tax credit notes and tax debit notes received, and copies issued, should be kept physically in Namibia. Accounting records can be kept outside Namibia but should be maintained on a centralized computer system that is linked to the regis tered person’s place of business in Namibia.

I. Returns and payment

Periodic returns. The tax return period is bimonthly for all registered persons other than those persons who conduct only farming activities. Registered persons who carry on only farming activities may elect four-monthly, semiannual and annual tax periods.

VAT returns must be filed by the 25th day after the end of the tax period. If the due date falls on a Saturday, Sunday or a public holiday, the due date is the next business day.

Import VAT returns for the declaration of the import of goods are due monthly by the 20th day of the month following the month of import and must be submitted even if no goods were imported in a particular month.

Periodic payments. Payment of VAT is due in full on the same date as the VAT return submission deadline, i.e., by the 25th day after the end of the tax period.

Payment of import VAT is due in full on the same date as the import VAT return, i.e., by the 20th day of the month following the month of import. If the payment date falls on a Saturday, Sunday or a public holiday, the due date is the next business day.

All VAT and import VAT payments can be made electronically or in cash. It is important to use the correct payment reference number to make payment so that the payment is allocated to the correct tax liability.

Electronic filing. Electronic filing is allowed in Namibia but not mandatory. However, while elec tronic filing is not mandatory, it is highly recommended, as manual submissions can only be used in exceptional circumstances. The NamRA’s new electronic system, Integrated Tax Administration System (ITAS), became operational from 1 January 2019. VAT-registered persons should activate their online tax registration to file returns electronically.

Payments on account. Payments on account are not required in Namibia.

Special schemes. No special schemes are available in Namibia. However, special rules are appli cable to various organizations and events in Namibia.

Annual returns. Annual returns are not required in Namibia.

Supplementary filings. No supplementary filings are required in Namibia.

Correcting errors in previous returns. Errors made in previous returns should be corrected by submitting revised hard-copy VAT returns. The revised returns cannot be resubmitted electronically. Output tax should be declared during the tax period in which the supply was made. Where input tax was underclaimed, the additional tax invoices received can be claimed as input tax adjustments on the VAT returns.

Digital tax administration. There are no transactional reporting requirements in Namibia.

J. Penalties

Penalties for late registration. A person who fails to register will be liable for the payment of a penalty equal to double the amount of output tax payable from the time such person becomes liable to be registered until they file an application for registration. No input tax may be claimed in respect of the period that has lapsed during which the person was not registered.

Penalties for late payment and filings. A penalty equal to 10% of the net VAT due is imposed if the VAT payment is made after the due date. The penalty is calculated as 10% for each month or part of a month the VAT remains outstanding, but the total penalty is limited to the tax due. However, a registered person may request that the Directorate of NamRA waive the penalty if the delay was not due to the intent of the VAT-registered person to postpone payment.

An additional penalty of NAD100 is imposed for each day the VAT return or import VAT return is submitted after the due date.

Interest is charged at 20% per annum on late payments of the VAT liability or import VAT liabil ity.

Penalties for errors. A person who fails to maintain proper records in respect of any tax period will be liable for the payment of a penalty of NAD3,000 for each day during which the failure continues.

Failure to notify, or late notification, of any changes to a taxpayer’s VAT registration details, may lead to a fine of NAD8,000 or a two-year prison sentence or both if found quality of noncompli ance with the law by a court.

Penalties for fraud. Additional tax not exceeding double the value of the VAT due may be levied in the case of evasion and where any person knowingly or recklessly makes a false or misleading statement.

Personal liability for company officers. Shareholders of companies and members of close corpora tions are liable to pay unpaid tax to the extent that the tax debt arose during the time the person was a shareholder or a member. Shareholders and or members will be held liable jointly or sever ally for a tax debt.

Statute of limitations. There is no legislated prescription period for tax matters in Namibia. The NamRA may indefinitely conduct reviews/audits. Although there is no legislation prohibiting NamRA to go back indefinitely, it is unlikely that reviews will be conducted outside five years, due to the fact that accounting records are only required to be retained for five years in terms of the VAT Act.

VAT periods that have been audited by NamRA are also not likely to be re-audited. The selection of taxpayers and periods that will be audited is random and may be in respect of tax periods in which a refund is claimed or VAT was paid. Current practice is that all VAT refunds are subject to audit before being paid to taxpayers.

In terms of voluntary corrections, for output tax, failure to declare sales in the tax period during which the sale occur could result in penalties and interest for late/underpayment being levied. For input tax, a registered person has three years to claim the input tax.