Namibia no tax haven, says ICAN

The Institute of Chartered Accountants of Namibia holds the “strong and clear view” that Namibia is not a tax haven, ICAN CEO Koos du Toit says.

Reacting on Namibia's inclusion on a European Union (EU) list of 17 countries which are regarded as “non-co-operative jurisdictions”, ICAN issued a statement saying it holds the view that Namibia offers no offshore incentives or arrangements attracting profits without real economic substance whatsoever.

“There is no basis to justify Namibia's inclusion as a perceived tax haven,” Du Toit says.

Tax havens are globally recognised as countries that offer offshore tax structures and arrangements aimed at attracting profits without real underlying economic substance and by offering very low income and transactions tax rates, he says.

“Namibia's tax framework is based on taxing Namibian source income to which a relatively high corporate income tax rate is applied. Non-mining companies are taxed at 32%, hard rock mining companies at 37.5% and diamond mining companies are taxed at 55%.”

ICAN says the only tax incentives Namibia offer are limited to manufacturing companies who establish bona fide operations in the country and are eligible for additional tax allowances and a reduced corporate tax rate for ten years. “From an investment promotion perspective, an export processing zone regime is in place which reduces the domestic income tax rate to 0% if an export enterprise is established in Namibia subject to approval by the minister of trade and industry. Both manufacturing status applications and export processing zone status applications are subject to a rigorous approval processes administered by the ministry of finance in conjunction with the ministry of trade and industry and both are directed at encouraging economic investment in Namibia and not towards creating opportunities to reduce foreign tax liabilities,” Du Toit says.



BEPS

The EU appears to have a concern that Namibia does not apply the minimum standards for base erosion and profit shifting (BEPS), he says.

“However, Namibia has specific domestic legislation which determines the taxable income of persons in respect of international transactions.

Du Toit says this legislation attempts to ensure Namibia receives its fair share of income tax on cross border transactions where Namibian-based businesses transact with related parties that are resident outside Namibia. It addresses the base erosion and profit shifting concerns raised by the Organisation for Economic Co-operation and Development (OECD) where Namibian businesses are involved in cross border transactions.

Income Tax Practice Note 2 of 2006 provides detailed guidelines on the application of this legislation and is based on guidelines issued by the OECD. Namibia is also a member of the Common Monetary Area (CMA) and exchange control is administered by the Bank of Namibia (BoN) for the movement of funds to or from Namibia. The BoN reviews applications from businesses who want to transfer funds to and from Namibia. These applications should be supported with documentation to substantiate the reason for moving funds, Du Toit concludes.