TAX AGREEMENT. by and between THE GOVERNMENT OF THE UNITED STATES OF AMERICA. acting through THE MILLENNIUM CHALLENGE CORPORATION, and

Transcription

1 EXECUTION VERSION TAX AGREEMENT by and between THE GOVERNMENT OF THE UNITED STATES OF AMERICA acting through THE MILLENNIUM CHALLENGE CORPORATION, and THE GOVERNMENT OF THE REPUBLIC OF NAMIBIA, acting through THE NATIONAL PLANNING COMMISSION Dated as of December 9, 2008

2 EXECUTION VERSION TABLE OF CONTENTS Page 1. General Exemption Implementation and Legal Basis for Exemption Non-Applicable Taxes Enforceability; No Conflict Program Reimbursement Method Refund of Taxes Paid Contrary to Terms of Compact Use of Government Payments and Refunds Late Payments Accountable Entity Exemption [Intentionally Omitted] Representatives Ministry Liaison Amendments Survival Language Notices Governing Law MCC Status Capitalized Terms Attachments... 6 NAMIBIA TAX AGREEMENT

3 EXECUTION VERSION TAX AGREEMENT PREAMBLE This TAX AGREEMENT (this Agreement ) is made as of December 9, 2008 (the Effective Date ), by and between the Government of the United States of America, acting through the Millennium Challenge Corporation, a United States Government corporation ( MCC ) and the Government of the Republic of Namibia (the Government ), acting through the National Planning Commission, a governmental entity established under the laws of the Republic of Namibia pursuant to the National Planning Commission Act, 1994 (each, a Party and collectively, the Parties ). RECITALS WHEREAS, the United States of America, acting through MCC, and the Republic of Namibia ( Namibia ) executed that certain Millennium Challenge Compact on July 28, 2008 (the Compact ) that sets forth the general terms and conditions on which MCC will provide funding of up to US$304,477,816 to Namibia for a Millennium Challenge Account program to advance economic growth and reduce poverty in Namibia; WHEREAS, the Government has designated and appointed MCA-Namibia to act as an agent of the Government to implement the Program and to perform certain rights and responsibilities of Namibia under the Compact; WHEREAS, pursuant to Section 2.8 of the Compact, Namibia has agreed to ensure that each of the following is free from the payment of any existing or future Taxes of or in Namibia: (a) the Program, (b) MCC Funding, (c) interest or earnings on MCC Funding, (d) any Project or activity implemented under the Program, (e) the Accountable Entity, (f) goods, works, services, technology and other assets and activities under the Program or any Project, (g) persons and entities that provide such goods, work, services, technology and assets or perform such activities, and (h) income, profits and payments with respect thereto (collectively, the Section 2.8 Items ); and WHEREAS, the Parties wish to hereby set forth the general terms and conditions pursuant to which such Section 2.8 Items will be free from the payment of Taxes. NOW THEREFORE, in consideration of the mutual promises and covenants contained herein, the Parties, intending to be legally bound, agree: 1. General Exemption. As required by Section 2.8 of the Compact, the Government will ensure that each of the Section 2.8 Items is free from the payment of any existing or future Taxes of or in the Republic of Namibia (including any such Taxes imposed by a national, regional, local or other governmental or taxing authority of or in the Republic of Namibia), consistent in all events with the terms and conditions of the Compact. The Government hereby acknowledges that it shall ensure that each Government affiliate and other governmental body of or in the Republic of Namibia implements and recognizes the provisions of Section 2.8 of the Compact. NAMIBIA TAX AGREEMENT

4 For the avoidance of doubt, in this Agreement, free from the payment of Taxes shall mean the use of one or more of the following mechanisms to the extent more specifically described herein: (a) exemptions that have been granted in accordance with applicable law, (b) where no such exemption has been granted, mechanisms whereby the Government (i) pays to the Program agreed amounts for estimated Taxes paid or to be paid with respect to a Section 2.8 Item as more particularly described in Sections 5 below (the Program Reimbursement Method ), (ii) directly pays Taxes otherwise owed by taxpayers (or refunds or reimburses to taxpayers the Tax amounts paid by such taxpayers) with respect to a Section 2.8 Item, as approved in writing by MCC or (iii) such other mechanisms agreed to by the Parties. 2. Implementation and Legal Basis for Exemption. Taxes that would apply to one or more of the Section 2.8 Items as of the date hereof but for the provisions of Section 2.8 of the Compact are identified on Attachment I to this Agreement. Set forth on Attachment II are the procedures that the Government will implement to ensure that the each of Section 2.8 Items is free from the payment of any of the Taxes identified on Attachment I, along with a description of the legal basis for such treatment. To the extent that there are Taxes not identified on Attachment I, whether currently in force or established in the future, that MCC determines, following consultations with the Government, are applicable to the Section 2.8 Items, the Government hereby agrees that it will implement appropriate procedures (approved in writing by MCC) to ensure that the Section 2.8 Items are free from the payment of such additional Taxes, and the Government shall provide MCC the legal basis for such procedures. For the avoidance of doubt, the identification (or lack of identification) of Taxes on Attachment I or otherwise in this Agreement, or the identification (or lack of identification) on Attachment II of procedures to implement such exemption from Taxes, shall in no way limit the scope of the tax exemption anticipated by Section 2.8 of the Compact. 3. Non-Applicable Taxes. Set forth on Attachment III are those Taxes that the Parties agree, as of the date hereof, qualify as Section 2.8(b)(ii) exceptions to Section 2.8(a) of the Compact. Notwithstanding the foregoing, MCC may, from time to time, notify the Government in writing that one or more of the Taxes identified on Attachment III no longer qualify for exception pursuant to Section 2.8(b)(ii) of the Compact. In such event, from and after the date of such notice from MCC, such Taxes will no longer apply to the Section 2.8 Items, and the Government shall promptly thereafter provide MCC the information required under Section 2 above with respect to the procedure that the Government will implement to ensure that such Taxes are not applied to the Section 2.8 Items, and the legal basis for such treatment. 4. Enforceability; No Conflict. The Government hereby represents that the Government s obligations set forth in Section 2.8 of the Compact and in this Agreement, and the mechanisms to effect compliance with such obligations, are enforceable in accordance with the laws, rules and regulations of the Republic of Namibia and do not conflict with any such laws, rules or regulations. The Government hereby represents that it intends to use its best efforts to ensure the timely adoption or passage and effectiveness of any further laws, rules or regulations contemplated by or necessary for the effective implementation of this Agreement. NAMIBIA TAX AGREEMENT 2

5 5. Program Reimbursement Method. (a) MCC and the Government hereby agree that the Program Reimbursement Method will apply with respect to the Taxes described in Schedules C, D and E of Attachment II for Section 2.8 Items. Thus, the Government will collect such Taxes subject to the obligation of the Government to pay to MCA-Namibia the amounts described in this Section 5. (b) In implementing the Program Reimbursement Method, the Government will pay to MCA-Namibia, for the benefit of the Program, the amounts in US Dollars (or the equivalent thereof in Namibia Dollars) set forth on Attachment IV on the terms set forth in Attachment IV (each, a Government Payment, collectively, the Government Payments ). If the Government elects to make a payment in Namibian Dollars, the amount of that payment will be the Namibian Dollar equivalent of US Dollars, using the Bank of Namibia s ask price for Namibian Dollars in US Dollars on the date of transfer. All payments must be received on or before the due dates indicated in Attachment IV of this Agreement. The Government will ensure that provision in the annual national budget of the Republic of Namibia is made as long as is necessary to enable the Government to meet its Government Payment obligations described herein. In accordance with Attachment IV, on a quarterly basis (or such other time as may be agreed to by MCC), the Government will deposit an amount sufficient to cover the full amount of the then accrued and unpaid Government Payments into one or more bank accounts acceptable to MCC. The Government may make Government Payments at any time before they are due. No MCC Funding, proceeds thereof or Program assets shall be used by the Government in making a Government Payment. 6. Refund of Taxes Paid Contrary to Terms of Compact. Pursuant to Section 2.8(d) of the Compact, if a Tax (other than a Tax covered by the Program Reimbursement Method) has been paid contrary to the requirements of Section 2.8 of the Compact or this Agreement, the Government will promptly pay to MCC, or to whomever MCC designates, the amount of such Tax. In such event, notice of such improperly paid Tax shall be delivered by MCC or MCA- Namibia to the Permanent Secretary of the Ministry of Finance (which notice shall specify the person or entity that paid the Tax, the type of Tax paid and the amount of Tax paid), and the Government shall cause such amount to be paid within thirty (30) days after submission of such notice. Such amount shall be paid to MCC (or as otherwise directed by MCC in the notice) in Namibia Dollars, and the Government shall provide prompt written confirmation of such payment to MCA-Namibia and MCC. In no event shall MCC Funding, proceeds thereof or Program assets be applied by the Government in satisfaction of its obligations under this Section Use of Government Payments and Refunds. The Government Payments, any refund, reimbursement or other payment hereunder received shall be used by MCA-Namibia in a manner to be agreed upon by MCC and MCA-Namibia, and shall be subject to the limitations on the use and treatment of MCC Funding set forth in the Compact. 8. Late Payments. In the event that the Government fails to make any Government Payment in full when due or fails to make any refund, reimbursement or other payment hereunder in full when due (including any VAT or other refund or reimbursement described on the Attachments hereto), interest shall be paid on such past due amount at a rate of 11% per NAMIBIA TAX AGREEMENT 3

6 annum, calculated on a daily basis and a 360-day year from the due date of such payment until such amount is paid. 9. Accountable Entity Exemption. The Government shall cause the appropriate governmental ministry or body to issue one or more tax exemption letter(s) (or other appropriate documentary evidence) to MCA-Namibia evidencing the exemption of MCA-Namibia from Taxes, as promptly as possible and in no event later than the date of the initial Disbursement of Compact Implementation Funding. 10. [Intentionally Omitted]. 11. Representatives. For all purposes of this Agreement, the Government will be represented by the individual holding the position of, or acting as, the Director General of the National Planning Commission and MCC will be represented by the individual holding the position of, or acting as, Vice President, Compact Implementation (each, a Principal Representative ). Each Principal Representative, by written notice to the other Party, may designate one or more additional representatives for all purposes other than signing amendments to this Agreement. A Party may change its Principal Representative to a new representative that holds a position of equal or higher rank upon written notice to the other Party. 12. Ministry Liaison. The Government hereby designates the Receiver of Revenue (Windhoek Regional Office) at the Ministry of Finance as a representative to serve as the liaison with MCA-Namibia and with Government affiliates in the administration of this Agreement and any other matters as may be necessary for the effective implementation of Section 2.8 of the Compact. The liaison will assure, inter alia, that each Government affiliate and each other governmental body implements and recognizes the obligations arising in connection with Section 2.8 of the Compact. 13. Amendments. The Parties may amend this Agreement only by a written agreement signed by the Principal Representatives. 14. Survival. The provisions of this Agreement shall survive termination of the Compact. 15. Language. This Agreement is prepared in English and in the event of any ambiguity or conflict between this official English version and any other version translated into any language for the convenience of the Parties, this official English version will prevail. 16. Notices. Any document or communication required or submitted by any Party under this Agreement must be in writing and, except as otherwise agreed by the Parties, in English. For this purpose, the address of each Party is set forth below: NAMIBIA TAX AGREEMENT 4

7 To MCC: Millennium Challenge Corporation Attention: Vice President, Compact Implementation (with a copy to the Vice President and General Counsel) 875 Fifteenth Street, N.W. Washington, DC United States of America Facsimile: +1(202) Telephone: +1(202) VPImplementation@mcc.gov (Vice President, Compact Implementation) VPGeneralCounsel@mcc.gov (Vice President and General Counsel) To the Government: The Director General National Planning Commission Office of the President Government Office Park Luther Street Block D, Room 206 Private Bag Windhoek Republic of Namibia Tel: Fax: With a copy to: MCA-Namibia Attention: Chief Executive Officer c/o National Planning Commission Office of the President Government Office Park Luther Street Block D, Room 206 Private Bag Windhoek Republic of Namibia Tel: Governing Law. The Parties acknowledge and agree that this Agreement is entered into for the purpose of implementing the Compact, and as such will be interpreted in a manner consistent with the Compact and will be governed by the principles of international law. 18. MCC Status. MCC is a United States Government corporation acting on behalf of the United States Government in the implementation of this Agreement. MCC and the United States NAMIBIA TAX AGREEMENT 5

8 Government have no liability under this Agreement, are immune from any action or proceeding arising under or relating to this Agreement, and each of the Government and MCA-Namibia hereby waives and releases all claims related to any such liability. In matters arising under or relating to this Agreement, neither MCC nor the United States Government will be subject to the jurisdiction of the courts or any other body of Namibia. 19. Capitalized Terms. Capitalized terms used but not defined in this Agreement will have the meanings given to such terms in the Compact. 20. Attachments. The attachments hereto constitute an integral part of this Agreement. SIGNATURE PAGE BEGINS ON THE NEXT PAGE NAMIBIA TAX AGREEMENT 6

9 IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be executed by a duly authorized representative as of the day and year first written above. THE GOVERNMENT OF THE UNITED STATES OF AMERICA, acting through the Millennium Challenge Corporation / s / By: Name: Darius Mans Title: Vice President, Compact Implementation THE GOVERNMENT OF THE REPUBLIC OF NAMIBIA, acting through the National Planning Commission / s / By: Name: Professor Peter H. Katjavivi Title: Director General, National Planning Commission SIGNATURE PAGE TO TAX AGREEMENT BY AND BETWEEN THE GOVERNMENT OF THE UNITED STATES OF AMERICA ACTING THROUGH THE MILLENNIUM CHALLENGE CORPORATION AND THE GOVERNMENT OF THE REPUBLIC OF NAMIBIA ACTING THROUGH THE NATIONAL PLANNING COMMISSION

10 EXECUTION VERSION ATTACHMENT I TAXES TAX STATUTORY REFERENCE 1. Value Added Tax Value-Added Tax Act, Customs Duties Customs and Excise Act, Income Tax Income Tax Act, Transfer Duties Transfer Duties Act, Fuel Levy Customs and Excise Act, Stamp Duties Stamp Duties Act, Municipal Rates and Taxes Local Authorities Act, 1992 NAMIBIA TAX AGREEMENT

11 EXECUTION VERSION ATTACHMENT II TAX SPECIFIC EXEMPTION MECHANISMS [Schedules Begin on Following Page] NAMIBIA TAX AGREEMENT

12 I. Legal Basis for Exemption SCHEDULE A VALUE ADDED TAX (VAT) Value Added Tax Act, 2000 (S. 40(2)). Allows refunds of VAT paid in connection with a technical assistance agreement. The Compact qualifies as a technical assistance agreement. II. Beneficiaries of Exemption MCA-Namibia. III. Procedures Pursuant to Section 15 of the Value-Added Tax Act, 2000 MCA-Namibia will apply for VAT registration within 30 days of the effective date hereof. Thereafter, pursuant to Section 40(2) of the Value-Added Tax Act, 2000, MCA-Namibia will complete a refund application form and submit it to the Ministry of Finance no later than 10 days after the end of each calendar month to request refund of all value-added taxes paid by MCA-Namibia during such month using Program Funding. All such amounts will be refunded by the Ministry of Finance within 30 days of its receipt of MCA- Namibia s refund application. NAMIBIA TAX AGREEMENT ATTACHMENT II - 2

13 I. Legal Basis for Exemption SCHEDULE B CUSTOMS DUTIES AND IMPORT VAT Customs and Excise Act, 1998, Rebate Item New SACU Agreement, 2002 (Section 20.3(b)) Value Added Tax Act, 2000; Rebate Item of Schedule V Value Added Tax Act, 2000 (S.2(b)) Allows exemptions from customs duties for goods imported under a technical assistance agreement. The new SACU Agreement 2002, Section 20.3(b) also allows exemptions from customs duties for goods imported under a technical assistance agreement. The Compact qualifies as a technical assistance agreement. Allows exemptions from VAT on the importation of goods or services under a technical assistance agreement. The Compact qualifies as a technical assistance agreement. II. Beneficiaries of Exemption MCA-Namibia, and contractors of MCA-Namibia provided that imported goods are consigned to MCA Namibia and are used for the benefit of the Program. III. Procedures With respect to customs duties and VAT on the importation of goods, bills of lading must be consigned to MCA Namibia. For goods with a port of discharge in Namibia, MCA-Namibia or its agent must present the following documents to the customs official at the port of discharge: (a) a Certificate of Exemption issued under Rebate Item , duly signed by the Permanent Secretary of the National Planning Commission and endorsed by the Commissioner of Customs and Excise; (b) an itemized invoice including values for the goods to be imported; and (c) the original bill of lading for the goods to be imported. For goods with a port of discharge outside Namibia, but within the Southern African Customs Union ( SACU ) with a final destination of Namibia, (1) the goods must be transported as bonded freight from the SACU port of discharge to a customs point in Namibia, and (2) the above documents must be presented to a customs official at that customs point. Goods imported under the customs duties rebate item may not be sold or disposed to any party who is not entitled to any privileges under that rebate item. Under Section 2(b) to Schedule V of the Value Added Tax Act, 2000, with respect to VAT on the importation of services provided for or on behalf of the Compact, all contracts for the importation of services shall be written naming the recipient of the services as having received such services under a technical assistance agreement, NAMIBIA TAX AGREEMENT ATTACHMENT II - 3

14 whereby neither the importer nor recipient of such services shall be required to declare any liability under the Value Added Tax Act, 2000, with respect to any VAT owed regarding imported services received under the Compact. NAMIBIA TAX AGREEMENT ATTACHMENT II - 4

15 SCHEDULE C INDIVIDUAL INCOME TAX I. Legal Basis for Exemption/ Reimbursement Exemption: S.16(1)(a) Income Tax Act, 1981 Reimbursement: Section 2.8 of Compact II. Beneficiaries of Exemption/Reimbursement MCA-Namibia Program III. Procedures The Program Reimbursement Method will be used to effect the economic equivalence to the Program of an individual income tax exemption as such exemption would have applied to all natural persons, other than Namibian citizens, working under the Program. 1. Over the course of the Compact term, all natural persons working under the Program pay individual income tax in accordance with their tax liabilities under Namibian law In accordance with the schedule set forth in Attachment IV, the Government will pay to MCA-Namibia an estimate of funds received from such individual income tax collection. Note: Vendors will be advised that they must pay all applicable income taxes when bidding on a contract. Similarly, to the extent that natural persons are negotiating contracts in connection with the Program, they will be advised of the use of the Program Reimbursement Method so that they may properly consider the implications that may have on their salary requirements. Accordingly, no reimbursement will be owing for or to an individual person for individual income taxes properly paid on revenue generated under the Program. 1 This should take into account, to the extent applicable, any provisions under Namibian law (such as currently existing exemptions under Namibian law; double taxation treaties; bilateral agreements; etc.), that might result in adjustment to such income tax liability. NAMIBIA TAX AGREEMENT ATTACHMENT II - 5

16 SCHEDULE D CORPORATE INCOME TAX I. Legal Basis for Reimbursement Section 2.8 of Compact II. Beneficiaries of Reimbursement MCA-Namibia Program III. Procedures The Program Reimbursement Method will be used to effect the economic equivalence to the Program of a corporate income tax exemption as such exemption would have applied to all companies working under the Program. 1. Over the course of the Compact term, all companies working under the Program pay corporate income tax in accordance with their tax liabilities under Namibian law In accordance with the schedule set forth in Attachment IV, the Government will pay to MCA-Namibia an estimate of funds received from such corporate tax collection. Note: When bidding on a contract, vendors will be advised that they must pay all applicable taxes. Accordingly, no reimbursement will be owing to the contractor for corporate taxes properly paid on revenue generated under the Program. 2 This should take into account, to the extent applicable, any provisions under Namibian law (such as currently existing exemptions under Namibian law; double taxation treaties; bilateral agreements; etc.), that might result in adjustment to such corporate tax liability. NAMIBIA TAX AGREEMENT ATTACHMENT II - 6

17 SCHEDULE E INDIRECT TAXES I. Legal Basis for Reimbursement Section 2.8 of Compact II. Beneficiaries of Exemption MCA-Namibia Program III. Procedures The Program Reimbursement Method will be used to effect the economic equivalence to the Program of an exemption for transfer duties, stamp duties, fuel levies, and municipal rates and taxes (collectively, the Indirect Taxes ) as such exemption would have applied to all persons or companies working under the Program. 1. Over the course of the Compact term, all persons or companies working under the Program will pay applicable Indirect Taxes in accordance with their tax liabilities under Namibian law In accordance with the schedule set forth in Attachment IV, the Government will pay to MCA-Namibia an estimate of funds received from such Indirect Tax collection. 3 This should take into account, to the extent applicable, any provisions under Namibian law (such as currently existing exemptions under Namibian law; double taxation treaties; bilateral agreements; etc.), that might result in adjustment to such corporate tax liability. NAMIBIA TAX AGREEMENT ATTACHMENT II - 7

18 EXECUTION VERSION ATTACHMENT III NON-APPLICABLE TAXES Motor Vehicle Licence Fees NAMIBIA TAX AGREEMENT

19 EXECUTION VERSION ATTACHMENT IV AMOUNTS OF GOVERNMENT PAYMENTS IN US$ Total Annual Government Payments US$716,634 US$1,156,855 US$2,871,144 US$3,360,978 US$3,270,455 The Government shall pay to MCA-Namibia in quarterly installments of Government Payments in accordance with the payment schedule below. PAYMENT TIMETABLE Payment Due Date (on the 15 th of the month) Amount September 2009 December 2009 March 2010 June 2010 September 2010 December 2010 March 2011 June 2011 September 2011 December 2011 March 2012 June 2012 September 2012 December 2012 March 2013 June 2013 September 2013 December 2013 US$358, US$358, US$289, US$289, US$289, US$289, US$717, US$717, US$717, US$717, US$840, US$840, US$840, US$840, US$817, US$817, US$817, US$817, NAMIBIA TAX AGREEMENT