Doing Business in Namibia
In Namibia business usually takes on one of the following forms:
- Individual trader
- Close Corporation
- Proprietary Company
- Public Company
To a significantly lesser extent, foreign companies register external branches in Namibia or Trusts are used for purposes of conducting business. The salient features of the 5 types listed above are as follows:
|Individual||Partnership||Close Corporation||Proprietary Company||Public Company|
|Liability||Self||Partners jointly & severally||Close Corporation||Company||Company|
|Max no. of owners||1||20||10||50||Unlimited|
|Tax Rate 2014||Max 37% on income above N$ 1,500,000 p.a.||Max 37% on income above N$ 1,500,000 p.a.||32%||32%||32%|
|Average days required to get into business||7||7||28||28||28|
|Foreign Shareholding possible||n/a||n/a||Yes, natural persons only||Yes||Yes|
|Listing on Stock Exchange||n/a||n/a||No||No||Yes|
Restricting factors to consider before opening a business:
- Unskilled unemployed workforce
- Government efficiency and timelines
- Timeframe to register CC / Company / Trust
- VAT refunds
- Tax administration / Certificates of good standing
- Government grants work-permits for foreign persons only in exceptional circumstances
- High tax rates
- Good infrastructure roads / rail / air / harbour
- Political stability
- Low serious crime rate
- Geological stability
- Limited amount of corruption
Registrations required for general businesses:
- Income Tax
- Provisional Tax
- Value-Added Tax
- Value-Added Tax on Imports
- Pay-as-you-earn (PAYE)
- Social Security
- Workmen’s Compensation
- Municipal registration
- Employment Equity registration
- Vocational Education Levy (VET) for Employers with an annual payroll above N$1, million
- Specific licenses
Generally, it is recommended that stamped proof of submission of the application for any registration is kept by the applicant; as many applications disappear mysteriously and without proof of submission of any application, penalties may be levied by the authorities.
For Income Tax Registrations
Download a copy of the registration form here
Individuals earning taxable income in excess of N$ 50,000 per annum or conducting any business, Close Corporations, Companies and certain Trusts must register for Income Tax by submitting the relevant form to Inland Revenue. Individuals must submit proof of identity with the form, whereas other entities must attach proof of registration and nominate a natural person as public officer for the entity.
Inland Revenue rarely confirms registration as taxpayer to individuals, and usually the taxpayer needs to ensure that registration has in fact taken place and obtain the “Certificate of Registration as taxpayer”. This registration certificate can be obtained within 7 working days after date of application. If the taxpayer cannot provide a copy of this Certificate to his employer, the employer is obliged to deduct PAYE at the maximum marginal rate from any earnings he pays to the taxpayer.
Download a copy of the Registration form here.
For corporate entities, Inland Revenue usually provides a Tax registration certificate within seven (7) working days after the application date. All Income Tax numbers in Namibia end with the digits – 011. The Value-Added Tax registration can only commence once the Income Tax number is known.
Corporate entities are automatically registered as provisional taxpayers at the time of registration for Income Tax. Any natural person earning in excess of N$ 5,000 from sources other than income subject to PAYE must also register for filing provisional tax returns.
There is no particular form to complete and a simple notification in the form of a letter addressed to Inland Revenue suffices. Non-notification may result in penalties being levied by the authorities.
Value Added Tax
Any person conducting a taxable activity in Namibia with a turnover or anticipated turnover of N$ 500,000 or more per annum must register for VAT purposes. The term taxable activity is widely defined in the VAT Act and includes non-profitable and even charitable organizations; but also provides for a number of entities which are exempt and do not need to register.
The registration process consists of the completion of the relevant form, confirmation of banking details by the taxpayer’s bank and inclusion of a municipal clearance certificate.
Registration becomes effective on the first day of the second month after date of registration by Inland Revenue (NB: not date of submission of application).
The registration process for VAT takes an average of one month, by which date the applicant should have received a written notification from Inland Revenue stating the effective date of the registration and the due date by when the first return must be submitted by the taxpayer and also the frequency of returns. VAT registration numbers end with the digits 015.
VAT returns need to be submitted on a bi-monthly basis by the 25th of the month following, however the first period may be for a period of three months, depending to which Category Inland Revenue has allocated the application.
VAT may not be claimed back on any capital acquisitions or imports done by the taxpayer at a date earlier than the effective date; and VAT paid on the acquisition of trading stock may only be claimed if the goods were physically on hand at the effective date of registration and have been acquired in the 4 months immediately prior to such effective date.
The duration of this process (ie. business start-up and registration, issuing of the relevant Income Tax number and finally VAT registration) poses a significant hurdle for new business entrants, as the entire process could take between 2-5 months. Since the taxpayer would want to claim the VAT paid on start-up items (eg. equipment, machinery, tools, etc.), he will only be able to acquire such items once the effective date of the VAT registration has passed. FCS has a number of solutions to help speed up these processes and we can assist our clients to reduce the time-span to between 4 and 6 weeks.
Failure to register for VAT purposes in terms of the Act attracts significant penal measures and should not be underestimated.
Value Added Tax on Imports
This registration is not compulsory but recommended for taxpayers who import goods from outside Namibia on a regular basis.
Registration is either applied for at the time the VAT registration takes place by completing the relevant section; or subsequent to that by completing the same form or by way of a letter addressed to Inland Revenue.
Import VAT returns must be submitted to Inland Revenue by the 20th of each month; even if no imports have taken place (penalties apply).
Inland Revenue provides taxpayers with a written notification stating the effective date of the registration and the due date by when the first return must be submitted by the taxpayer. Import VAT registration numbers end with the digits 016.
Pay As You Earn
Taxpayers with employees earning more than N$ 50,000 per annum must register as an “Employer” at Inland Revenue. This is for PAYE purposes and must be done in the month where the first employee is hired. A short form needs to be completed for Registration purposes.
Inland Revenue uses prescribed tables to deduct PAYE from employees’ earnings – these tables are available upon request. PAYE must be paid by the 20th of the month following. Inland Revenue usually confirms registration in writing and will provide a PAYE5 book containing a number of Certificates, which the taxpayer needs to complete annually on or before 31 March. PAYE registration numbers end with the three digits 014.
Social Security Registration
For Social Security form downloads go to: www.ssc.org.na
This registration is compulsory for all persons employing at least one other person, and is not limited to businesses only but also applies to others such as domestic workers. Social Security provides for a number of benefits for employees, such as sick, maternity and death benefits.
The relevant registration form needs to be submitted to the Social Security Commission. The employer and employee contribute equally to the fund, and contributions must be paid by the last day of every month.
Workmen’s Compensation Registration
For form downloads go to: www.ssc.org.na
This registration is compulsory for all businesses employing at least one person, and registration needs to be done in the month when the business employs its first person.
This fund provides cover for medical and related expenses of an employee earning less than N$ 81,300 per annum who is injured on duty, subject to a number of rules. The employer is required to annually by 31 March submit a return detailing the breakdown of the workforce as well as total earnings paid for the year; and will then receive an assessment from the Workmen’s Compensation Commissioner for the amount payable.
Failure to register will not jeopardize the claim of the employee in the case of an injury, but entitle the Commissioner to recover all costs from the employer.
Most municipalities require all businesses to register with them. The registration process varies from one municipality to the next, but overall is an uncomplicated process that can be completed within a few days.
When planning a new business, care should be taken that the premises from which operations are to be conducted, are zoned correctly for the type of business envisaged.
Employment Equity Registration
Every person employing 25 or more employees in Namibia must register with the Employment Equity Commission. The aim of the Employment Equity Commission is to ensure that Government’s Affirmative Action principles are applied and controlled; and that no unfair labour practices exist at the workplace.
The Employment Equity process can be rather cumbersome and time consuming, as the Commission requires a detailed report, containing a number of business statistics, plans and reports on past achievements, to be submitted annually.
Although general business in Namibia is not too regulated, certain sectors do require special licenses, permits or similar authorization from the government or their agents. Before commencing on any specific activities, advice should be sought on whether any special licenses or registrations are required; for example:
- Tourism sector: Tourism Levy registration; Public Driving Permit
- Fishing: Fishing license / quota
- Mining: Mining licenses
- Professions: Registration with professional Institutes or bodies
- Transport: Vehicle special licenses
For some licenses and other matters a certificate of good standing must be obtained from Inland Revenue.
Download a copy of the registration form here
Foreign Investors should take note that:
- Direct or indirect ownership of 50% and more or beneficial control of agricultural land (farms) is prohibited in terms of legislation.
- Dividends payable from companies or distributions from Close Corporations attract NRST (Non-Residents Shareholders Tax) at generally 10%, unless a double taxation agreement exists between the domicile country of the foreign investor and Namibia which provides for a different rate.
- Foreign Exchange Control mechanisms are in place and the repatriation of any funds to a country outside the Common Monetary Area (CMA – consisting of Namibia, South Africa, Lesotho and Swaziland) may be difficult if certain rules have not been followed BEFORE funds are invested in the CMA.
- Local companies owned by foreign shareholders are restricted in terms of borrowing funds (eg from a foreign holding company) to one third of the issued share capital of the local entity.
- The Namibian Income Tax Act provides rules for Transfer Pricing issues.
- Royalties paid to an entity outside Namibia attracts a withholding tax calculated at 30% of the corporate tax rate (currently 34%), thus 10,2%.
- In terms of the Foreign Investment Act, 1990, the Minister of Trade & Industry has by notice in the Government Gazette (15 April 2010) prescribed that foreign nationals may only by special permission from the Minister engage in any retailing business, public transport services or in a hair dressing / salon or beauty care business.