This is a summary of the budget speech delivered by the Honourable Minister of Finance, Ms Saara Kuugongelwa-Amadhila, on 5 March 2008.

The Minister's speech contained no new tax proposals but if a Tax Bill is tabled it may include items not referred to in the Minister's speech.

Non-manufacturing Companies

The basic rate of tax payable by companies (other than for mining operations, including oil and gas extraction) remains unchanged at 35%.

The tax rate applicable to a company rendering services in connection with diamond mining on behalf of a person licensed to conduct such mining operations remains unchanged at 55%.

The tax rate applicable to a company rendering services in connection with mining on behalf of a person licensed to conduct mining operations other than diamond mining will be 37,5% for tax years commencing on or after 1 January 2008.

Manufacturing Companies

The basic rate of tax payable by manufacturing companies remains unchanged at 18% for the first 10 years of assessment as a registered manufacturer.

The normal tax rate of 35% will apply after the 10 year period ends.

Mining Companies

The basic rate of tax payable by hard rock mining companies remains unchanged at 37,5%.

The basic rate of tax payable by oil and gas extraction companies remains unchanged at 35%. These companies are also subject to additional profits tax that is calculated in terms of a complex formula contained in the Petroleum Taxation Act.

Individuals

It is expected that the maximum marginal rate will remain unchanged at 35% for taxable amounts exceeding N$200 000 for the tax year commencing 1 March 2008. The minimum tax threshold remains unchanged at N$36 000.

The tax deductible limit for contributions to approved retirement fund plans and educational policies for dependents remains unchanged at N$40 000 per year.

Tax Rates for Individuals and Trusts for the year of assessment ending 28 February 2009

Taxable amount

From To Marginal %
0 36 001 0 0
36 000 40 001 0 17,5
40 000 80 001 700 29,5
80 000 200 001 12 500 34,5
200 000 and over 53 900 35

Definition of Person

Although it has been Revenue's practice to tax trusts as individuals the definition of 'person' has been amended to include trusts for tax years commencing on or after 1 March 2009.

The basic rate of tax payable by diamond mining companies remains unchanged at 50% plus a surcharge of 10%, resulting in an effective tax rate of 55%.

Definition of Dividend

The definition of the term 'dividend' has changed with effect from 1 March 2008 to exclude the distribution of interest from the assets of a unit trust to unit holders. The effect of this amendment is that the interest distributed to a unit holder will be taxed at the individual's marginal tax rate for the year of assessment ending 28 February 2009 and at the corporate tax rate as from 1 March 2008 for companies and close corporations.

Withholding Tax on Interest

Interest earned by any person other than a Namibian company from a Namibian banking institution or a Namibian unit trust scheme will be subject to a withholding tax of 10% on the interest earned with effect from 1 March 2009. This is a final withholding tax for the affected taxpayers with the exception of companies and close corporations who are beneficiaries of trusts that will be liable for tax at the corporate tax rate of 35%.

The N$500 interest exemption applicable to interest earned from a Namibian banking institution will be deleted with effect from 1 March 2009.

Interest on late payment of Income Tax

Interest payable on the late payment of income tax will be calculated at a rate of 20% per year on the simple basis method from a date to be published in the Gazette. To date, the effective date has not been published in the Gazette.

At present interest payable is calculated daily and compounded monthly. The amount of interest that can be recovered due to late payment will be limited to the tax payable when the amendment becomes effective.

Value-Added Tax

The Minister did not mention any amendments to the Value- added Tax Act in her budget speech.
Exchange Control

A number of exchange control reforms will be announced by the Bank of Namibia that will relax foreign diversification limits for institutional investors and streamline administrative procedures.

Transfer Duty

Although the alienation of the members' interest in property owning close corporations will attract transfer duty once the Transfer Duty Act is amended. To date an Amendment Bill has not been tabled in the National Assembly.

Excise Duty

The excise duty of various alcohol and tobacco products will be increased. The increased percentage in excise duty ranges from 5,2% on cigarette tobacco to 10,8% on cigarettes and 7% for clear beer to 11% on spirits.