topical namibian tax considerations - from ... · exporting investment/ recruiting 9 april 2018....

www.pwc.com.na

Topical Namibian tax considerations - from a Mining perspective April 2018

PwC

Agenda

April 2018Nam Taxes – A Mining Perspective

2

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

PwC

Namibian Tax revenue

Source

Corporate

tax

Employee tax

Value Added Tax

Nam Taxes – A Mining Perspective

3

April 2018

Other taxesSACU

Revenue

PwC

Total Tax Revenue, SACU revenue and Corporate Tax revenue:2009/10 to 2018/19: N$(B)

4


0

10

20

30

40

50

60

70

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

PwC

SACU and Corporate Tax as % of Total Revenue

5


0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

SACU revenue as % of Total Revenue

PwC

SACU and Corporate Tax as % of Total Revenue

6


0%

5%

10%

15%

20%

25%

30%

2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19

Income tax as % of Total Revenue

PwC

Corporate Tax revenue – mining companies contribution2009/10 to 2018/19: N$(B)

7


0

2

4

6

8

10

12

14

1 2 3 4 5 6 7 8 9 10

PwC

Corporate Tax revenue and mining companies contribution:2009/10 to 2018/19: N$(B)

8


0%

5%

10%

15%

20%

25%

1 2 3 4 5 6 7 8 9 10

Mining company tax revenue as % of Total Revenue

PwC

The mining process


Prospecting/

Exploration

Rehab/

Deregistration

Extraction/Mine/Processing/ Operations/

Exporting

Investment/

Recruiting

9

April 2018

PwC

The mining process


Prospecting/

Exploration

Rehab/

Deregistration

Extraction/

Mine/

Processing/ Operations/

Exporting

Investment/

Recruiting

10

April 2018

PwC

• N$0-N$200K = Voluntary registration

• N$200K – N$500K = Compulsory registration

• VAT on exploration costs?

• No deferment of input tax

• Denied input tax

VAT registration


Voluntary and Mandatory registration

11

April 2018

PwC

Voluntary Registration


12

Fixed place of business

or abode

Keep or will keep proper accounting

records

Will submit regular and reliable tax

returns

Previously compliant –

Other tax returns

1 2

3 4

Taxable supplies > N$200,000

PwC

The mining process


Prospecting/

Exploration

Rehab/

Deregistration

Extraction/Mine/

Processing/ Operations/

ExportingInvestment/

Recruiting

13

April 2018

PwC

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


PwC

The mining process


Prospecting/

Exploration

Rehab/

Deregistration

Extraction/Mine/Processing/ Operations/

Exporting

Investment/

Recruiting

15

April 2018

PwC

Interest income earned from mining operations

16


- 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

PwC

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

April 2018

PwC

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

Thin Capitalisation – What is the rule?


18

April 2018

PwC

Zero Rated Sales

19


01

02

Direct export of goods from Namibia

Services to a non-resident not in Namibia at the time the services are supplied (restrictions to this provision)

Sch. III

0%

PwC

RecapDenied Inputs

The following input tax claims are prohibited by the VAT Act:

• Passenger vehicles, except

(no matter if for business use)

• Entertainment (food (meals to staff / crew), beverages, tobacco, accommodation amusement, recreation or hospitality of any kind) Except

20


dealers, tour operators, rental companies, short-term insurers, charitable organizations, children's’ home, old-age home, orphanage

tour operators,entertainment business, part of transport services(being taxable supplies)

http://www.google.co.za/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.indiannewsandtimes.com/2014/09/15/trade-show-duo-meets-rising-demand-processed-packaged-food-beverages-india/&ei=yW1tVbmvC8rbUbr1gPgG&bvm=bv.94911696,d.d24&psig=AFQjCNGHg0dEYMX3dzmzB0FPfOSvzbxnpw&ust=1433321172855251

PwC

Document retention – all of these have a N$ value… …the art is not in filing but in retrieving….

21


• Valid tax invoicesInput tax on local purchases

• Originally stamped SAD500 and related import documentation

Claiming of import VAT as input tax

• Being organised, systematic, pro-activeVAT refund audits

• Building a school, employee houses, entertainment/recreation area

Input tax on non-mining activities

PwC

A tax invoice to contain the following: (Awareness, Staff training, new recruits)

22


02

03

04

Rental of residential accommodation

Public transport services

Medical & paramedical services

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

The consideration excluding tax, the total amount of tax charged and the total consideration

Must be in English

PwC

Import documentation – Ready for a Customs audit?

Originally stamped SAD500 filing

Procurement function

Awareness creation

Transport entity/clearing agent

SARS?

23


PwC

The mining process


Prospecting/

Exploration

Rehab/

DeregistrationExtraction/Mine/Proc

essing/ Operations

/

Exporting

Investment/

Recruiting

24

April 2018

PwC

Specific inclusions– Paragraph (o) of gross income definition

“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”

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)”

25


PwC

Specific inclusions– Paragraph (q) of gross income definition

A new paragraph (q) is inserted in the gross income

definition.

Same as paragraph (o) but

also applies to “…company that

holds a petroleum licence or petroleum

right…”

Amounts allowed to be deducted:

- acquisition costs and exploration

expenditure; - Improvement

costs.

Deduction may not create a

loss.

Do licence holders receive a bigger variety of costs deductible than

companies in the mining industry?

26


PwC

Rehabilitation Expenditure – Section 18

27


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

PwC

Rehabilitation Trust – Section 16(1)(f)(i)(cc)

28


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.

PwC

Business Restructuring – VAT effects

29


• Non-supply = not subject to VAT (look out for 2018/2019 proposed VAT amendment)

Share / member’s interest sale

• ⓯% supply unless approval obtained for ⓿%Going Concern Sale

• ⓯% supply unless Input VAT was denied (non-supply)Asset Sale

Asset Sale

• ⓯% deemed supply market value of capital goods still on hand (property?)

VAT and Import VAT deregistration

PwC

Thank you

30

April 2018

The information contained in this publication by PwC Namibia is provided for discussion purposes only and is intended to provide the reader or his/her entity with general information of interest.

The information is supplied on an “as is” basis and has not been compiled to meet the reader’s or his/her entity’s individual requirements. It is the reader’s responsibility to satisfy him or her that

the content meets the individual or his / her entity’s requirements. The information should not be regarded as professional or legal advice or the official opinion of PwC. No action should be taken

on the strength of the information without obtaining professional advice. Although PwC take all reasonable steps to ensure the quality and accuracy of the information, accuracy is not guaranteed.

PwC, shall not be liable for any damage, loss or liability of any nature incurred directly or indirectly by whomever and resulting from any cause in connection with the information contained herein.

© 2018 PwC Namibia [Practice Number 9406] (“PwC”). All rights reserved. PwC refers to the Namibian member firm, and may sometimes refer to the PwC network. Each member firm is a

separate legal entity. Please see www.pwc.com/na for further details.

The information contained in this publication by PwC Namibia is provided for discussion purposes only and is intended to provide the reader or

his/her entity with general information of interest. The information is supplied on an “as is” basis and has not been compiled to meet the reader’s

or his/her entity’s individual requirements. It is the reader’s responsibility to satisfy him or her that the content meets the individual or his / her

entity’s requirements. The information should not be regarded as professional or legal advice or the official opinion of PwC. No action should be

taken on the strength of the information without obtaining professional advice. Although PwC take all reasonable steps to ensure the quality and

accuracy of the information, accuracy is not guaranteed. PwC, shall not be liable for any damage, loss or liability of any nature incurred directly or

indirectly by whomever and resulting from any cause in connection with the information contained herein.

© 2018 PwC Namibia [Practice Number 9406] (“PwC”). All rights reserved. PwC refers to the Namibian member firm, and may sometimes refer to

the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/na for further details.

Contact us for your tax consulting needs:

Riana Esterhuyse (Direct Tax)[email protected]: +264 64 217 736

Chantell Husselmann (Indirect Tax)[email protected]: +264 61 284 1327

topical namibian tax considerations - from ... · exporting investment/ recruiting 9 april 2018....

Documents