INTERNATIONAL TAX

2067. Namibian withholding tax

May 2012 - Issue 152

The Namibian Income Tax Amendment legislation of 2011 introduced a withholding tax of 25% on the gross fees payable to a non-resident on or after 31 December 2011, for 'management and consultancy services'. Note that this term is defined to cover services of all kinds and not merely those of a management and consultancy nature.

So for example:

In the case of South African service providers however, provided they do not have a 'permanent establishment' in Namibia, it is our view (and we understand that Namibian Revenue agrees) that they are not exposed to the tax by virtue of the double taxation agreement (DTA) between Namibia and South Africa. Namibian clients should therefore not withhold the tax from such fees.

The above summary is very brief and simplified. There are difficulties of interpretation in regard to the commencement date, the meaning of 'management and consultancy services' and the trigger date for a particular fee to be taxed (we have suggested above that the trigger is liability to pay but this might not be true in every case).

We strongly recommend that any corporate or individual client rendering services in Namibia should take specialist advice to properly understand the risks and, in particular, to establish whether they are protected under the DTA.

Ernst & Young