On 7 March 2018, Mr. Calle Schlettwein, The Finance Minister of Namibia delivered the 2018 budget speech (the Budget). Changes to the Income Tax Act will come into effect in 2019.

Phasing out of preferential tax treatment to manufacturers

The Finance Minister proposes the phasing out of preferential tax treatment that is only granted to certain existing manufacturers. As an intervention to encourage business development and job creation, support instruments for SMEs and start-ups will be introduced and developed over the MTEF.

Export Processing Zone

The Budget repealed Export Processing Zone Act and Special Economic Zones are introduced.

Individual tax rates

The Budget re-adjust the current tax brackets for Individual Income Tax, reduce the lower bracket tax rate from 18 percent to 17 percent and introduce new tax rates of 39 percent and 40 percent for individuals earning over N$1.5 million and N$2.5 million respectively.

Dividend tax

Under the Budget a 10% dividend tax introduces for dividends paid to Namibian residents.

Taxation of foreign income

The Budget proposes taxing all income earned from foreign sources by Namibian residents and will have to declare such income in their annual tax returns.

Commercial activities of charitable, religious and educational institutions

Income derived from commercial activities by charitable, religious, educational and other types of institutions under Section 16 of the Income Tax Act are currently exempt from tax. The Budget proposes such institutions will be required to register as taxpayers and file annual income tax returns.

Tax rate of betting and gaming entities

The tax rate for betting and gaming entities may increase from 32% to 37%.

VAT

Budget introduces 15% VAT on income of listed asset managers and proposes 15% VAT on proceeds on the sale of shares of a company owning commercial immovable property.

Excise taxes

The following proposed changes to the excise taxes will become effective upon gazetting of the amendment Acts:

  • increasing the fuel levy by 25 cents per liter for all levied fuel products in terms of the Section 54 of the Customs and Excise Act, this includes petrol, diesel and paraffin.
  • expanding the coverage of export levy to include other specific agricultural, forestry and game products and other mining products currently not covered,
  • introducing additional 5 percent national “sin” tax on alcohol and tobacco products.