By Johan Nel, Director, AJM
Namibia is having a moment. With significant developments in mining, oil and gas, and green hydrogen, the country is capturing global attention, and investor interest is surging. Conferences are buzzing, high-level visits are making headlines, and billionaires are circling. But beneath the optimism and opportunity lies a less glamorous, often overlooked reality: tax. For smart investors, understanding Namibia’s tax landscape isn’t just a compliance exercise but a strategic advantage.
The Missing Link in Namibia’s Investment Narrative: Tax Strategy
The recent launch of NDP6 and the announcements made by our President, Her Excellency Dr. Netumbo Nandi-Ndaitwah, to support the economy, drive economic growth, and address socio-economic issues are creating healthy debates that are long overdue.
Conferences are being held, and thought leadership events are lined up. Toyota Japan is visiting the country. The government is travelling abroad for investment conferences. Foreign governments are visiting us and expressing interest in the Land of the Brave. Billionaires are taking notice of us and planning to establish operations here. All in all, it seems Namibia has something to offer. Namibia is on the map of global investors.
During all this hype, the discussions are mostly centred around local content, peace and stability, general fiscal policy, and Namibia as a country that is ready for investment. However, critics have their views on the above and whether Namibia is serious about attracting investment.
What is lacking, however, is a proper discussion around tax. Not only a high-level mention of an unattractive corporate tax rate and withholding tax regime, but a more in-depth understanding of some of the crucial aspects when it comes to structuring an investment in a tax-effective manner. Investors need to be aware of the intricacies of the legislation that can impact their projects and result in increased costs. Modelling an outcome with incorrect assumptions is not good business practice and tends to lead to unexpected costs later in the project.
Lessons from Experience: Structuring Investments in Namibia
For more than 15 years, I have had the privilege of discussing investment structuring with clients, investors, and tax experts from various multinational companies in Namibia. Whether it relates to the oil hype when HRT Africa found light oil in 2013, the revival of the Kudu gas possibilities in 2013, 2016 and 2019, the investment into renewable energy and the first 5mw solar investment in 2016, or the most recent interest in the country over the past 18 months, I have been part of these conversations from a tax structuring perspective. This exposure helps me when I engage clients to not only answer the usual questions, but more importantly, ask them the right questions that they may not have considered at first.
What I have learned is that tax is often not factored into proposals and calculations because the operations/sales/new business team identifies an opportunity without considering the tax impact that arises from it.
Essential Tax Considerations for Foreign and Local Investors in Namibia
Some items need to be considered by new investors in Namibia to manage their expectations and their costs.
Import VAT in Namibia: A Crucial Cash Flow Issue
Import VAT on goods is due at a rate of 16.5%. This is paid either upon entry into Namibia or, if the taxpayer has a deferred import VAT account, it is payable by the 20th of the following month. Although the import VAT can be claimed back, provided the requirements of the VAT Act are met, it still must be paid (i.e. therefore, cash flow planning is crucial). Once claimed back, it most often results in a refund for VAT purposes, especially when large capital-intensive projects are involved. The moment a VAT refund is triggered, an audit is required from the Namibian Revenue Agency (NAMRA). Unfortunately, this can result in a tedious and lengthy process, often taking more than three months. The cost of this capital tied up should be factored into the investment consideration.
Namibia’s Source-Based Tax System and Its Implications
Namibia does not recognise the concept of a permanent establishment in its local legislation. It only applies to instances where we have a double taxation agreement in place with the country from which the service provider/contractor is tax resident. There are no exemptions for taxable income generated where you spend less than a certain amount of time in Namibia. Where companies operate in Namibia, even if for a short duration, this can create tax obligations. Where services are rendered within Namibia, this generates Namibian source income, which is immediately taxable in Namibia.
Expats who work in Namibia and earn more than N$100,000 annually are therefore taxable in Namibia, unless DTA relief applies.
Additionally, VAT registration may be required when consideration is received for services rendered in Namibia, and the value of the exceeds N$1 million in any twelve-month period.
Double Taxation Agreements in Namibia
Namibia currently has double taxation agreements (“DTAs”) in place with 11 countries. They are South Africa, Botswana, Mauritius, the United Kingdom, Russia, Sweden, India, France, Germany, Malaysia, and Romania.
Tax treaties are not negotiated easily. The Ministry of Finance announced in October 2016 that Namibia approved a DTA framework and that existing Namibian DTAs will be renegotiated based on this framework. We are almost 10 years down the line, and nothing has happened in this regard. For this reason, I would caution against an expectation that, due to a large project envisaged for Namibia, an investor can rely on the future implementation of a tax treaty between Namibia and their country.
Understanding Namibia’s Withholding Tax Regime
Namibia levies withholding taxes on the following payments:
- Services (admin, management, technical, consulting or any other similar fee). This applies irrespective of where the services are rendered. It applies to payment from a Namibian resident to a non-resident
- Interest payments to non-residents
- Royalties, including specifically the payment for the right to use industrial, commercial, or scientific equipment (i.e. thus includes rental payments)
- Dividends
The rates can be summarised in the table below, which also displays the reduced rates in terms of the tax treaties in place.
Tax Policy vs Tax Collection in Namibia
NAMRA is a tax collection agency. They are not responsible for tax policy, so it is not worth the time of an investor trying to convince NAMRA why certain taxes are not “fair and equitable”. It is simply not in their mandate to change or entertain any of this. They are not influenced by flashy business plans and statistics on employment creation and the future of Namibia. Whilst I fully understand that investors are keen to communicate this to NAMRA, it may not be energy well spent at the right level. These discussions should be conducted through lobbying for changes to existing legislation and influencing the development of new legislation. This is often done best through industry bodies.
New Interest Deduction Limits for Namibia: Impacts on Cross-Border Financing
Group funding is a crucial component of a new investment in a jurisdiction. The so-called “debt push down” structures historically worked well in Namibia, as thin capitalisation rules were not actively applied.
For years ending on or after 31 December 2024, a new rule was introduced regarding the deductibility of interest from connected persons. Whilst it has been widely criticised, the principles are primarily aligned with what the OECD has recommended in the BEPS project, and therefore, several countries have similar legislation.
The amended legislation introduces a cap on the net interest expense at 30% of the tax EBITDA (where the net interest expense exceeds N$3 million) for any loans from a connected person. The amounts that are not allowed as a deduction in the current year may be carried forward to the next year of assessment. This excess can be carried forward for a maximum of 5 years, but for entities involved in the mining, oil, gas, and green hydrogen industries, the carry-forward period is extended to 10 years.
Assessed Loss Limitations
Let this sink in. Although you may have accumulated tax losses, you will be required to pay tax on a portion of your taxable income for the year.
One of the major concerns is that once a taxpayer starts claiming capital allowances on assets, this quickly creates a tax loss (which is normal given the investment made compared to the revenue generated). This loss (i.e. arising from capital allowances) may be forfeited over time if it is not “ring-fenced” or allowed to be kept separate from normal operating losses.
The limitation of assessed losses should aim to limit the carry forward of operational losses, but should not have a punitive effect of losing the advantage of capital allowances where spending took place on capital projects. The intention of the BEPS action plan is to prevent multinationals from shifting profits out of countries. Disallowing capital allowances through the expiry of tax losses would not support this initiative and can discourage investment (both locally and foreign).
The legislation prescribes that once a taxpayer generates taxable income over N$1 million for the tax year, the loss that can be utilised against taxable income is limited to the greater of:
- N$1million, or
- 80% of your taxable income for the year.
Tax losses can be carried forward for 5 years, but for entities involved in the mining, oil, gas, and green hydrogen industries, the carryforward period is 10 years.
If you incur a taxable loss in a year, the loss is added to your assessed losses and carried forward. (It is essential to keep a record of the dates of the different tax losses that arise, as they each have their own 5/10-year period for which they can be carried forward.)
Tax Holidays, Incentives and Subsidies in Namibia
Projects and investments cannot get special treatment regarding tax holidays, incentives and subsidies. Approvals on a case-by-case basis for a specific taxpayer, as they are making a significant investment in Namibia, are not available. All that is applied is the legislation that is currently in place.
Advanced Pricing Agreements in Namibia
Namibia does not have a policy of advanced pricing agreements or advanced tax rulings. Thus, from a transfer pricing perspective, you will not be able to obtain comfort upfront on the pricing of connected person transactions for transfer pricing purposes. Furthermore, NAMRA does not provide rulings on hypothetical scenarios; instead, they aim to offer their comments on a real set of facts applicable to the business.
Conclusion
As Namibia positions itself as a serious destination for global investment, those leading the charge must go beyond surface-level opportunity. The tax landscape can shape the success or failure of any venture, due to its complex, evolving, and uniquely local nature. Investors who take the time to understand and proactively structure for these realities will be far better equipped to navigate risks, unlock value, and build lasting impact in the Land of the Brave.