|Name of the tax||Value-added tax (VAT)|
|Trading bloc membership||Southern African Customs Union Member, South African Development Community Member|
|Administered by||Commissioner of Inland Revenue|
|Other||Zero-rated and exempt|
|VAT number format||123 4567-01-5|
|VAT return periods||Bimonthly|
|Compulsory registration||Annual taxable supplies of NAD500,000|
|Voluntary registration||A reasonable expectation that future taxable supplies will exceed NAD200,000 in a 12-month period|
|Recovery of VAT by non-established businesses||Yes|
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 that are imported from countries in the Southern African Customs Union (Botswana, Lesotho, Namibia, South Africa and Swaziland) are not subject to customs duty but are subject to import VAT.
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 Value-Added Tax 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 registration 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.
Voluntary registration. A person whose turnover is below the compulsory registration threshold may register for VAT on a voluntary basis provided that there is a reasonable 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. VAT grouping is not allowed under the Namibia VAT Act. All legal entities must register for VAT individually, and all activities carried on by such person must be accounted for on one registration number. VAT is charged on transactions between separately registered entities within a commercial group in accordance with the general VAT rules and subject to the rules relating to supplies between related persons.
Non-established businesses. A “non-established business” is a business that has no fixed establishment in Namibia. A non-established business that makes taxable supplies of goods or services continuously or regularly in Namibia must appoint a tax representative and open a Namibian bank account to register for VAT.
Deemed supplies. 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 indemnity payments
- Change in use
- Acquisition of used goods (excluding immovable property) from a person not registered for VAT
Goods imported to 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 Inland Revenue 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.
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.
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 import is specified in Schedule V of the VAT Act.
Registration procedures. The VAT registration application (VAT 1) must be completed and submitted to Inland Revenue 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 Inland Revenue, becomes effective on the first calendar day of the second month after the registration letter was received from Inland Revenue. On specific application the registration can become effective on the first calendar day of the month following the receipt of the registration confirmation.
Late-registration penalties. 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.
Digital economy. There are no special rules for the taxation of the digital economy in Namibia.
Deregistration. A person may apply for deregistration if the value of such person’s taxable supplies in a period of 12 months (begin on the date of application) will be less than NAD500,000.
The term “taxable supplies” refers to supplies of goods and services that are subject to tax at either the standard rate (15%) or the zero rate (0%). A registered person must account for VAT at the standard rate on all supplies of goods and services, unless the supply is specifically zero-rated (Schedule III of the VAT Act) or exempted under the VAT Act.
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 that all of the requirements are met)
- Supply of goods subject to the fuel levy
- Supply of telecommunication services, electricity, water, refuse removal and sewerage to residential 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 subject to tax and that are specified in Schedule IV of the VAT Act. A registered person is not entitled to claim a deduction on expenses incurred to make exempt supplies (see Section F).
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. Not applicable.
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 situations, including betting transactions, construction, supplies made from vending machines and “lay-by” sale agreements.
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 performed. 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 actually consigned or delivered. The tax point for services supplied to a branch or main business outside Namibia is when the services are performed.
Periodic supplies. The tax point for periodic supplies is the earlier of the date on which payment is due or the date on which payment is received.
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 deeds registry
- The date on which any payment in respect of selling price is received (excluding deposits)
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
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.
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 recovered 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 including the driver (referred to as a passenger vehicle in the VAT Act)
- Business and staff entertainment, which includes accommodation, meals and beverages when travelling 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)
- Mobile phones
- Air transport of goods within Namibia
- Aviation fuel
- Trading stock
- Raw materials
- Marketing expenditure
Partially deductible input tax (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.
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, while input tax directly related to exempt supplies is not deductible.
- The second stage identifies the amount of the remaining input tax (for example, input tax on general business overhead) 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 Inland Revenue 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 VAT deduction may be claimed and there will be no requirement to apportion the input VAT claim.
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.
Preregistration 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 registration. The VAT paid in respect of the acquisition of capital goods prior to registration may not be claimed.
Recovery of VAT by non-established businesses
VAT incurred by businesses that are neither established nor registered in Namibia may be recovered 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.
A business rendering services on a continuous or regular basis in Namibia may be liable to register for VAT even though the business is neither established nor registered in Namibia. In this instance, the non-established business registered for VAT may recover input tax through the normal VAT return process.
VAT invoices and credit notes. 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.
The following information is required for a valid tax invoice:
- The words “tax invoice” displayed in a prominent place
- The name, address and VAT registration number of the supplier
- The name and address of the recipient
- An individual serialized number and the date on which the tax invoice was issued
- Full description of the goods or services supplied
- Quantity or volume of goods or services supplied
- The value of the supply, the VAT amount and the VAT-inclusive amount of the supply
In order to claim input VAT, the claimant must be in possession of a valid tax invoice for each supply including periodic supplies.
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 cancelled
- 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.
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 have to 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 Inland Revenue in support of the export from Namibia.
Foreign-currency invoices. In general, a tax invoice must be issued in Namibia dollars. If an invoice is issued in a foreign currency, the Namibia dollar (NAD) equivalent must be determined using the appropriate exchange rate on the date on which the invoice is issued.
VAT returns and payment
VAT 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. Payment is due in full by the same date. 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. Payment is due in full by the due date. If the payment date falls on a Saturday, Sunday or public holiday, the due date is the next business day.
Special schemes. Not applicable.
Electronic filing and archiving. Not currently applicable, but in the future the Minister may prescribe procedures for submitting returns in electronic format.
Annual returns. Not applicable.
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 Inland Revenue 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.
Additional tax not exceeding double the value of the VAT due may be levied in the case of evasion.
A range of other offenses related to VAT can result in additional tax and penalties, including fines and, for severe offenses, imprisonment for a period not exceeding 24 months.
Interest. Interest is charged at 20% per annum on late payments of the VAT liability or import VAT liability.