www.pwc.com.na Topical Namibian tax considerations - from a Mining perspective
Agenda Time Topic Presenter 20 minutes Q&A discussion on Mining income tax contribution Value Added tax Employee tax Corporate Tax Combined contribution: Chantell and Riana 10 minutes Open floor commentary/questions Combined contribution: Chantell and Riana 2
Namibian Tax revenue Source SACU Revenue Other taxes Corporate tax Employee tax Value Added Tax 3
Total Tax Revenue, SACU revenue and Corporate Tax revenue: 2009/10 to 2018/19: N$(B) 70 60 50 40 30 20 10 0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 4
SACU and Corporate Tax as % of Total Revenue 0.4 SACU revenue as % of Total Revenue 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 5
SACU and Corporate Tax as % of Total Revenue 30% Income tax as % of Total Revenue 25% 20% 15% 10% 5% 0% 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 6
Corporate Tax revenue mining companies contribution 2009/10 to 2018/19: N$(B) 14 12 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 7
Corporate Tax revenue and mining companies contribution: 2009/10 to 2018/19: N$(B) 25% Mining company tax revenue as % of Total Revenue 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 8
The mining process Prospecting/ Exploration Extraction/Mine /Processing/ Operations/ Exporting Investment/ Recruiting Rehab/ Deregistration 9
The mining process Prospecting/ Exploration Extraction/ Mine/ Processing/ Operations/ Exporting Investment/ Recruiting Rehab/ Deregistration 10
VAT registration N$0-N$200K = Voluntary registration Voluntary and Mandatory registration N$200K N$500K = Compulsory registration VAT on exploration costs? No deferment of input tax Denied input tax 11
Voluntary Registration 1 2 Taxable supplies > N$200,000 Fixed place of business or abode Will submit regular and reliable tax returns Keep or will keep proper accounting records Previously compliant Other tax returns 3 4 12
The mining process Prospecting/ Exploration Investment/ Recruiting Extraction/ Mine/ Processing/ Operations/ Exporting Rehab/ Deregistration 13
International Assignees All earnings earned in Namibia are generally taxed in Namibia (source) Gross up (fringe benefit) If double tax treaty exists between home country and Namibia conditions of treaty may provide tax relief to the individual. General treaty requirements: In respect of employment in Namibia remuneration shall be taxable in the home country only if all three of the below conditions apply: Person is present in Namibia for period less than 183 aggregate days in a 12 month period; AND Remuneration is paid by an employer who is not a resident of Namibia; AND Remuneration is not borne by a permanent establishment or a fixed base which the employer has in Namibia. 14
The mining process Prospecting / Exploration Investme nt/ Recruitin g Extraction/Mine/ Processing/ Operations/ Exporting Rehab/ Deregist ration 15
Interest income earned from mining operations - Part of mining operations and taxed at 37.5%? - Separately taxed as non-mining at 32%? - Look at underlying nature of the interest, is it really interest or is it dividends and capital growth? - Ignore accounting treatment, look at real nature - Know the product and speak to your investment advisor 16
Transfer Pricing Section 95A of the Income Tax Act All transactions between; cross-border; connected persons; should be conducted at arm s length (i.e market related prices). Profit follows: Functions undertaken Risks undertaken Assets utilised 17
Thin Capitalisation What is the rule? 1) Debt : Equity Ratio should be 3:1 on interest bearing loans between related parties - Equity = Fixed capital includes: Share capital Share premium Accumulated profits (Capital and Revenue) Permanent owner s capital (where no share capital) Reduce by any reserves and increase by any losses - Debt = Interest bearing loans and other financial assistance Consequence of getting the ratio wrong: - Excessive interest disallowed as income tax deduction - Interest, penalties 18
Zero Rated Sales Direct export of goods from Namibia 01 Sch. III 0% Services to a non-resident not in Namibia at the time the services are supplied (restrictions to this provision) 02 19
Recap Denied Inputs The following input tax claims are prohibited by the VAT Act: Passenger vehicles, except (no matter if for business use) dealers, tour operators, rental companies, short-term insurers, charitable organizations, children's home, old-age home, orphanage Entertainment (food (meals to staff / crew), beverages, tobacco, accommodation amusement, recreation or hospitality of any kind) Except tour operators, entertainment business, part of transport services (being taxable supplies) 20
Document retention all of these have a N$ value the art is not in filing but in retrieving. Input tax on local purchases Valid tax invoices Claiming of import VAT as input tax Originally stamped SAD500 and related import documentation VAT refund audits Being organised, systematic, pro-active Input tax on non-mining activities Building a school, employee houses, entertainment/recreation area 21
A tax invoice to contain the following: (Awareness, Staff training, new recruits) The word tax invoice must appear prominently Name, address and registration number of the supplier Name and address of the recipient Individual serialised number and date Description of goods or services Quantity or volume Rental of residential accommodation 02 The consideration excluding tax, the total amount of tax charged and the total consideration 03 Must be in English Public transport services Medical & paramedical services 04 22
Import documentation Ready for a Customs audit? Originally stamped SAD500 filing Procurement function Awareness creation Transport entity/clearing agent SARS? 23
The mining process Prospecting / Exploration Investme nt/ Recruitin g Extraction/ Mine/Proc essing/ Operations / Exporting Rehab/ Deregistration 24
Specific inclusions Paragraph (o) of gross income definition The definition of mineral licence in Section 1. any mineral licence as defined in the Minerals (Prospecting and Mining) Act, 1992 (Act No 33 of 1992) any amount received or accrued, whether in money or in kind, as consideration (or payment of like nature) or the open market value by way of a sale, donation, expropriation, cession, grant or other alienation or transfer of ownership of a mineral licence or right to mine minerals in Namibia, and includes a sale, donation, expropriation, cession, grant or any other alienation or transfer of ownership of any share or member s interest in a company that holds a mineral licence or mineral right whether directly, or indirectly, less the acquisition cost of the mineral licence or mineral right, but the acquisition cost of the licence or right may not create a loss 25
Specific inclusions Paragraph (q) of gross income definition Same as paragraph (o) but also applies to company that holds a petroleum licence or petroleum right Deduction may not create a loss. A new paragraph (q) is inserted in the gross income definition. Amounts allowed to be deducted: - acquisition costs and exploration expenditure; - Improvement costs. Do licence holders receive a bigger variety of costs deductible than companies in the mining industry? 26
Rehabilitation Expenditure Section 18 The deduction of expenses incurred and/or a provision for rehabilitation Old legislation no longer applicable Do while still busy with operations so it can be argued as expense incurred in production of income Alternative contributions to not for profit organisation qualifying for exemption under the Income Tax Act 27
Rehabilitation Trust Section 16(1)(f)(i)(cc) The establishment of such a rehabilitation trust may obtain tax exemption under s16(1)(f)(i)(cc) the receipts or accruals of any company, trust, etc.. if its sole or principal object is to engage in or promote nature conservation or animal protection activities Thus, if such exemption has been obtained for such rehabilitation trust, the provision of funds received by such trust will not be taxable in the hands of the trust. However, any returns received by such trust on investments made by the trust may be taxable in the hands of the trust depending on the nature of the investments. 28
Business Restructuring VAT effects Share / member s interest sale Non-supply = not subject to VAT (look out for 2018/2019 proposed VAT amendment) Going Concern Sale ⓯% supply unless approval obtained for ⓿% Asset Sale ⓯% supply unless Input VAT was denied (nonsupply)asset Sale VAT and Import VAT deregistration ⓯% deemed supply market value of capital goods still on hand (property?) 29
Thank you Contact us for your tax consulting needs: Riana Esterhuyse (Direct Tax) riana.esterhuyse@pwc.com Tel: +264 64 217 736 Chantell Husselmann (Indirect Tax) chantell.husselmann@pwc.com Tel: +264 61 284 1327 The information The information contained contained in this in publication this publication by by Namibia Namibia is provided is provided for discussion for discussion purposes purposes only and only is and intended is intended to provide to provide the reader the reader or his/her or entity with general information of interest. The information his/her entity is supplied with general on an information as is basis of interest. and has The not been information compiled is supplied to meet on the an reader s as is or basis his/her and entity s has not individual been compiled requirements. to meet It the is reader s the reader s responsibility to satisfy him or her that the content or his/her meets entity s the individual individual or requirements. his / her entity s It is requirements. the reader s responsibility The information to satisfy should him not or be her regarded that the as content professional meets the or legal individual advice or or his the / her official opinion of. No action should be taken on the entity s strength requirements. of the information The information without obtaining should professional not be regarded advice. as professional Although or legal take advice all reasonable or the official steps opinion to ensure of the. quality No action and accuracy should be of the information, accuracy is not guaranteed., taken shall not on the be liable strength for of any the damage, information loss without or liability obtaining of any nature professional incurred advice. directly Although or indirectly by take whomever all reasonable and resulting steps to from ensure any the cause quality in connection and with the information contained herein. accuracy of the information, accuracy is not guaranteed., shall not be liable for any damage, loss or liability of any nature incurred directly or 2018 indirectly Namibia by whomever [Practice and Number resulting 9406] from ( ). any cause All in rights connection reserved. with the refers information to the contained Namibian herein. member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see www.pwc.com/na for further details. 2018 Namibia [Practice Number 9406] ( ). All rights reserved. refers to the Namibian member firm, and may sometimes refer to the network. Each member firm is a separate legal entity. Please see www.pwc.com/na for further details. 30