Transactions with non-residents
Included in the definition of taxable supplies are services rendered to non-residents. The question that follows, is whether value-added tax (VAT) should be accounted for on these supplies.
In terms of the VAT Act, a supply of services to a non-resident person who is outside Namibia at the time the services are supplied may be zero rated, i.e. charged with VAT at the rate of 0%, provided that the services, among other, are not directly in connection with immovable property situated in Namibia; or directly in connection with movable property situated in Namibia at the time the services are supplied unless the movable property is exported from Namibia subsequent to the supply of services.
In order to best illustrate the application of the aforementioned provision, let us consider an example where the zero rating can be applied and where it cannot be applied.
Examples
Where the zero rating can be applied is a scenario where a local company manages a foreign subsidiary and charges a management fee. This fee can be zero rated as it is a service rendered to a non-resident who is not in Namibia at the time the service is rendered and which is further not directly attributable to immovable or movable property situated in Namibia.
Where the zero rating cannot be applied is a scenario where a local company rents a warehouse to a non-resident. Due to the warehouse being immovable property situated in Namibia at the time the services are supplied, the resident person cannot apply the zero rating provision and VAT should be levied at the rate of 15% on the supply.
Although the above highlights two scenarios in which the supply may be zero rated, the VAT Act does contain several provisions that zero rate supplies to non-residents.
It is important to consult your tax advisor on the correct provisions to ensure your tax affairs are in order.
• Memory Mbai is the senior manager in VAT at PwC Namibia. This series on tax is published bi-monthly on a Monday in Market Watch.
In terms of the VAT Act, a supply of services to a non-resident person who is outside Namibia at the time the services are supplied may be zero rated, i.e. charged with VAT at the rate of 0%, provided that the services, among other, are not directly in connection with immovable property situated in Namibia; or directly in connection with movable property situated in Namibia at the time the services are supplied unless the movable property is exported from Namibia subsequent to the supply of services.
In order to best illustrate the application of the aforementioned provision, let us consider an example where the zero rating can be applied and where it cannot be applied.
Examples
Where the zero rating can be applied is a scenario where a local company manages a foreign subsidiary and charges a management fee. This fee can be zero rated as it is a service rendered to a non-resident who is not in Namibia at the time the service is rendered and which is further not directly attributable to immovable or movable property situated in Namibia.
Where the zero rating cannot be applied is a scenario where a local company rents a warehouse to a non-resident. Due to the warehouse being immovable property situated in Namibia at the time the services are supplied, the resident person cannot apply the zero rating provision and VAT should be levied at the rate of 15% on the supply.
Although the above highlights two scenarios in which the supply may be zero rated, the VAT Act does contain several provisions that zero rate supplies to non-residents.
It is important to consult your tax advisor on the correct provisions to ensure your tax affairs are in order.
• Memory Mbai is the senior manager in VAT at PwC Namibia. This series on tax is published bi-monthly on a Monday in Market Watch.
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