SETTING UP & OPERATING BUSINESS IN NAMIBIA

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TYPE OF BUSINESS Companies · A business may be conducted by individuals, partnerships, trusts, close corporations, Namibian companies or branches of foreign companies. · A close corporation is governed by the Close Corporations Act. It may have only individuals as members and, thus, is not usually a suitable vehicle for foreign investors. · A Namibian company may be public (name ends in Limited ) or private (name ends in (Proprietary) Limited) . Both private and public companies are governed by the Companies Act. There is no minimum equity capital requirement for companies. · The private company is the most common vehicle for operating a business in Namibia. It may have only one member and director. There need not be any Namibian resident directors. · A subsidiary of a foreign company is regarded as a Namibian company. The legal liability of the parent company is limited to the amount of capital committed (together with any guarantees provided). · Both a Namibian company and a branch operation are subject to the provisions of the Companies Act. · An annual duty is payable on the issued share capital of a Namibian company of a branch. The duty is payable on incorporation or registration and thereafter annually within one month of a company's year end. The rate of annual duty is N$ 80 up to N$ 200 000 issued capital, thereafter N$ 4 per completed · N$ 10 000 of issued share capital. · A branch is obliged to lodge a certified copy of its Memorandum and Articles of Association (or other instrument defining its constitution) with the Registrar of Companies, as well as a sworn translation into English where appropriate. · Two primary requirements for a branch are : · an annual audit, and · financial statements must be lodged with the Registrar of Companies. (Financial statements must also be lodged for the company as a whole. Exemptions, renewable every two years, may be obtained in certain circumstances). · Locally registered private companies are also required to be audited but are not required to lodge their annual financial statements with the Registrar of Companies. TAXATION · Tax year end is end February or, with permission, the company's financial year end · The basis is territorial as opposed to a residence or worldwide basis. · In the main, only income arising from a Namibian source is taxed. · Trading profits will be taxable in Namibia if the business is conducted in Namibia. · Income from services is sourced in Namibia if the services are rendered there. · There are certain deemed source rules. Avoidance of Double Tax · Namibia has double tax agreements with South Africa, the United Kingdom, Germany and Sweden. (Treaties with various other countries, including Holland and Romania, have been initialled and others are being negotiated). · In terms of these agreements, the foreign resident undertaking will only be taxable in Namibia if it conducts business in Namibia through a permanent establishment. · In the absence of treaty provisions, a unilateral tax credit is available for payment of foreign direct and withholding taxes. The credit may not exceed the Namibian tax applicable to the underlying income. Corporate Tax Rates · In general 35%. Gold mining and oil and gas extraction companies are taxed on special formulae; diamond mines at an effective rate of 55%. Special rebates may be granted to approved manufacturing companies. · Foreign income is not subject to Namibian tax. · Two provisional tax payments are made in respect of each tax year. Any balance is payable on assessment (after an annual return is lodged). · Dividends received by a company are exempt from tax · There is no branch remittance tax or withholding tax on interest Dividends 10% Royalties 10,5% Individual Tax Rates · Progressive rates of tax apply. The first N$15000 of taxable income is exempt from tax. The maximum rate of 35% is levied on taxable income exceeding N$80000. · The first N$ 500 of interest is exempt · Dividends received by a resident individual are exempt from tax. · Non-residents are subject to tax on dividends declared at a rate of 10%. Tax on Royalties is 10,5%. There is no withholding tax on interest, but liability to normal tax may still arise. Other Taxes · If a subsidiary or branch employs personnel it must register as an employer with the Revenue authorities and deduct tax (PAYE) from remuneration payable to employees · Sales tax is levied at 11% on taxable services and 8% in respect of sales and importations. An additional sales levy, varying between 0% on items such as fresh food and 15% on non-necessities such as spirits and cigarettes, is also levied at manufacture or import level. · Royalties payable to non-residents are subject to a withholding tax of 10,5% (unless the rate is reduced in terms of a double tax agreement). · There is no capital gains tax, estate or gift tax levied on net worth · Transfer duty on land and buildings (maximum rate of 8% on property value exceeding N$ 250 000). · Stamp duty on transfer of shares (0,2%) and on issue of shares (0,2%). · Additional Sales Levy on the purchase of locally manufactured and imported goods. Sales duty rates vary from 0% on basic foodstuffs to 15% on luxury goods. · Customs and excise taxes. · Individuals under the age of 65 who are employed for more than two days a week are required to contribute 0,9% of basic salary to the Social Security Commissioner. Employers are required to contribute an amount equal to the employee's contribution. The maximum contribution per individual is N$27 per month. INCENTIVES Moveable Fixed Assets Moveable fixed assets may be depreciated on a straight line basis over three years. Buildings An initial allowance of 20% on the cost of buildings used for the purpose of trade is granted in the first year in which the building is brought into use and an annual allowance of 4% in each of the following 20 years. Special Manufacturing Allowance Manufacturers whose enterprise is beneficial to the economic development of Namibia may apply for registered manufacturer status with the Ministers of Finance and Trade and Industry. A registered manufacturer qualifies for a number of special allowances, namely: · Enhanced building allowance · An initial allowance of 20% on the cost of buildings used solely for manufacturing purposes is granted in the first year in which the building is brought into use and an annual allowance of 8% in each of the following 10 years. · Tax holiday · Manufacturing taxable income may be reduced by 50% of income from manufacturing in the first five years of registration as a manufacturer, 45% in the sixth year and 40% for the next eight years. An assessed loss cannot be created. · Exporters allowance · Increased deductions ranging from 25% to 75% of specified marketing expenditure may be claimed in respect of the sale of goods exported. · Training allowance · An additional 25% of remuneration, pension or benefit contributions in respect of employees directly engaged in the manufacturing operation. · An additional 25% of training expenditure for employees directly engaged in the manufacturing operation provided the programme content has been approved. · Special exporters allowances · Taxable income may be reduced by 80% of taxable income derived from the export of manufactured goods excluding fish and meat products. An assessed loss cannot be created by this allowance. EXCHANGE CONTROL Namibia is part of the common monetary area which includes Lesotho, South Africa and Swaziland. Exchange control regulations applicable to South Africa are thus also applicable to Namibia. There is no exchange control within the common monetary area. VISA REQUIREMENTS Exemptions · Visits - no maximum period No country · Visits - maximum period 30 days/90 days Switzerland, Austria, Italy, Russia, Britain, Zimbabwe, Zambia, USA, France, Botswana, Angola, Canada, Tanzania, Japan, Germany, Liechtenstein, Mozambique, Holland, Belgium, Luxembourg, Singapore, Kenya, Brussels, South Africa, Malaysia, Cuba and the Nordic countries which include Sweden, Norway, Finland, Denmark and Iceland. Applications All other countries require visas. Application forms are available from any Namibian Embassy, and the Ministry of Home Affairs in Namibia.