DOING BUSINESS IN AFRICA: NAMIBIA AND BOTSWANA APRIL 2019 - PWC
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Doing business in Africa: Namibia and Botswana April 2019
Agenda 1. Why this seminar? 2. Introduction to the PwC Africa Desk 3. Doing Business in Namibia 4. Doing Business in Botswana 5. Q&A DbiA Namibia and Botswana – April 2019 2
Why this seminar
Africa continues to be a
region with vast
unexplored potential.
This seminar shall provide
some insight on doing
business in SSA,
particularly Namibia and
Botswana, what this area
has to offer, and the risks
investors should be aware
of.
4
Seminars so far Angola (2x) Botswana (2x) Cameroon Malawi (Republic of) Ethiopia (2x) Ghana Kenya (2x) Mauritius Mozambique (2x) Namibia (2x) Nigeria Rwanda Seychelles South Africa Tanzania Zambia (2x) Republic of Congo DbiA Namibia and Botswana – April 2019 5
PwC Africa Desk
The PwC presence in Africa
In Africa
• Member firms in 34 countries with over
9,000 professional staff.
• We have the largest footprint of
professional services on the African
continent.
• All our African firms are locally-owned.
• Provide a range of professional business
advisory services to the public and
private sectors throughout the continent.
• Committed to the development and
prosperity of the African people and
economies.
DbiA Namibia and Botswana – April 2019 7
The Africa Coordination
Centre (ACC)
• The ACC acts as a one-stop shop for clients
engaging in cross-border transactions across
Africa, ensuring the smooth delivery of tax
services.
• The Centre is staffed by analysts with multi-
country experience, who speak 5+ languages
fluently, including English, French, German and
Portuguese.
DbiA Namibia and Botswana – April 2019 8
Thought leadership – Afritax Newsletter DbiA Namibia and Botswana – April 2019 9
How the Africa Desk can support you
Managing cross border Identification of right subject Proactive regular updates on
engagements with one single matter experts and oversight new developments in engaged
point of contact. of high quality advice. countries.
Central contact for quick Guidance on business Coordinating thought
technical guidance. practices and experiences leadership pieces and
when dealing with other proposals including multiple
African countries. territories.
DbiA Namibia and Botswana – April 2019 10Africa Desk Team-Johannesburg Alan Seccombe Ayuk Takor Fabio Henriquez Partner Manager Manager T: +27 11 797 4110 T: +27 11 287 0741 T: +27 11 797 5900 E: alan.seccombe@pwc.com E: ayuk.w.takor@pwc.com E: henriquez.fabio@pwc.com DbiA Namibia and Botswana – April 2019 11
Africa Desk Team-Cape Town
Charl du Toit Asif Joosub
Partner Associate Director
T: +27 21 529 2367 T: +27 21 529 2305
E: charl.du.toit@pwc.com E: asif.joosub@pwc.com
DbiA Namibia and Botswana – April 2019 12Doing business in Namibia
Agenda 3.1. Country Context 3.2. Business Vehicles 3.3. Legal and labour 3.4. Tax Framework 3.5. Budget Speech 19/20 3.6. Key Considerations 3.7. Contacts DbiA Namibia and Botswana – April 2019 14
Country Context
Country Context Political • Namibia has strong democratic foundations; • SWAPO is the ruling party in Namibia, since independence in 1990; • The President is elected by direct popular vote for a term of five years and can be re-elected for a second term of office; • His Excellency Dr. Hage G. Geingob, is the 3rd and current president of the Republic of Namibia. • Cabinet consists of the President, the Vice-president, the Prime Minister, Deputy Prime Minister and such other Ministers from the members of the national Assembly. There are currently 26 Cabinet Ministers. • Namibia has a stable political environment. DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 16
Country Context Socio-economical • Namibia is the 34th largest country in the world, with a 824,292 km² surface area; • The capital city of Namibia, is Windhoek and the currency in circulation is the Namibian Dollar (NAD); • Namibia has an estimated population of 2,533,794 (The World Bank, 2017); • There is still a significant divide between the high income class and lower income class, within Namibia; • Namibia falls within upper-middle-income economies for income per capita; • Namibia’s repo rate currently stands at 6.75% and the prime rate at 10.5%; • The average inflation rate currently stands at 4.7% (Bank of Namibia, 2019); and • Namibia ranked 107th out of 190 countries, for ease of doing business (The World Bank Group, 2019 http://www.worldbank.org/content/dam/doingBusiness/media/Ann ual-Reports/English/DB2019-report_web-version.pdf) DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 17
Country Context Socio-economical • Main exports include diamonds and uranium; • The main industries in Namibia are mining, renewable energy, manufacturing, fishing, agriculture and tourism; • Key trading partners are the South African Customs Union, South African Development Community and European Union; • There is a framework for national development – ‘Vision 2030’; • Windhoek ranks 196th out of 209 cities in the global cost of living index (Mercer’s Annual Cost of Living Survey 2018) • There has been significant developments in terms of renewable energy plants, agriculture (construction of the Neckartal dam) and the Port of Walvis Bay (extension and improvement of harbour). DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 18
Business Vehicles
Business Vehicles 2.1 Types of Entities 2.2 Company vs Branch DbiA Namibia and Botswana – April 2019 20
Types of entities
1. Public or Private 2. Branch of a Foreign 3. Sole Proprietor 4. Partnerships,
Company Company including joint
ventures
5. Close Corporation 6. Business Trust
DbiA Namibia and Botswana – April 2019 21Business Entities Incorporation
Step 1: BIPA Step 2: Inland Step 3: Social Step 4: Relevant Step 5: Local
Revenue/NAMRA Security governing
bodies/authorities municipal
Business and Commission
Ministry of Finance requirements
Intellectual Property Certain trades may
Authority • To administer the Social Security Act require registration or Your business may
tax laws in an 34 of 1994 application.
• Home of Business require a fitness
efficient and • To professionally • Namibia Tourism certificate in order to
and IP effective manner to Board
administer the trade or operate from
Registrations, maximize State Funds for the • Namibia a specific location.
Administration and Revenue from benefit of its Qualifications
Regulations in internal taxation members and their Authority • City of Windhoek
Namibia. sources. dependents. • Namibian (fire brigade
• Recently Accordingly, the Competition
• In an effort to Commission
building inspection)
improve service implemented the administration of
ITAS online e-filing Funds involves the • Communications
delivery and ensure collection of Regulatory
the effective admin system, in
contributions, Authority of
improving Namibia
of business and administration of registration of
intellectual property taxes members
rights (IPRs).
DbiA Namibia and Botswana – April 2019 22Business Vehicles
Company versus Branch
Item Distinguishing factor Company Branch
1 Legal personality Yes That of parent company
2 Tax personality Yes Yes
3 Liability Limited to shareholding Limited to shareholding
4 Number of shareholders 1 up to 50 1 up to 50
5 Incorporation/set up costs Lower Higher
6 Stakeholders perception Long term presence Short term presence
7 Audit requirements Mandatory Mandatory (Separate tax calculation)
8 Possible double taxation agreement relief
Taxation of dividend distribution (to non resident) Varies between 10% and 20%
from withholding tax (NRST)
9 Liquidation/business closure Complex Complex
10 Annual duties Based on local share capital Based on foreign share capital
11 All shareholders and directors of the
Shareholders/Directors requirements No specific requirements foreign company, must be shareholders
and directors of the branch.
DbiA Namibia and Botswana – April 2019 23Example Namibian Private
Company Scenario
Holding
Branch Scenario
Company
Foreign
Entity Namibian Border
Subsidiary
Company
DbiA Namibia and Botswana – April 2019 24Legal and Labour
Legal and labour 3.1 Legal system at a glance 3.2 Labour 3.3 Bank of Namibia Requirements DbiA Namibia and Botswana – April 2019 26
Legal and labour Legal system at a glance • Namibian law is rooted in South African legislation and legal principles; • Judiciary operates with total independence; • The Government is committed to a free market economic system, to promote the private sector development; • Courts in Namibia consist of traditional courts, lower courts, the high court and the supreme court; • The Law Society of Namibia (LSN) is a self-regulating body created in terms of the Legal Practitioners Act (1995) which serves the profession and the public by promoting justice, protecting the independence of the judiciary and upholding the Rule of Law; and • No Electronic Communications Act (as of yet). DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 27
Legal and labour Labour – Investor Considerations • Namibia has an abundant supply of unskilled labour; • Social security contributions are compulsory (by law) and provide for maternity leave, sick leave and death benefits; • Employment Equity Commission - The Affirmative Action (Employment) Act, 1998 (Act 29 of 1998) was passed by the Namibian Parliament with a view to redress imbalances at the workplace, arising from the discriminatory socio-economic dispensation which had previously existed in this country; • Vocational and Education Training Levy applies to all employers whose annual payroll costs exceed N$1 million (approx. USD 70k) in a financial year, and this levy is regulated by the Namibian Training Authority. DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 28
Legal and labour Labour – Immigration documents Immigration documents available to foreign employees: • Business Visa (non-remunerated) – valid up to 3 months; • Work Visa (remunerated) – valid up to 3 months; • Work permit (Employment permit) – for period exceeding 3 months; • PRP (permanent residence permit) – no fixed period, favourable significant associated investment, need not be in country specific period, if travelling renewal every 2 years. DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 29
Most topical must and
must not do's:
It is advisable to
• decide on type of entity in advance, especially where a shelf
company or Cc is purchased;
• not conclude contracts without consulting on any relevant local
legislation, for example WHT on imported services, incurring
significant expenses before being VAT registered and terms
on importation or transportation of imported goods;
• analyse key stakeholders in advance, define their interest in
your local business activity and plan accordingly; and
• apply well in advance for required work visas or permits and
also for the repatriation of funds.
DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 30Bank of Namibia
Requirements
Bank of Namibia Requirements
Foreign exchange regulations:
• All remittances of dividends, interest, royalties etc. to
countries outside the common monetary area need
approval from the central bank.
• No foreign exchange restrictions or regulations apply if
money is remitted to / from South Africa, as the money
will flow within the same common monetary area.
• It is advised that all foreign investments are registered
with the Bank of Namibia (“BON”).
• It is advised that an authorised dealer should be
consulted prior to effecting any forex movements.
Proprietary and confidential. Do not distribute. 31
DbiA Namibia and Botswana – April 2019Bank of Namibia Requirements Bank of Namibia Requirements The procedures: • Administered by Bank of Namibia; • Authorised dealers – commercial banks in the country. Control applies to all Namibian residents, as well as to foreign-owned business undertakings operating in Namibia; DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 32
Bank of Namibia Requirements
Procedures - continued
Payments
unrestricted - Important to Dividends
presentation of declare equity made freely –
the prescribed capital before documentary
investment requirements
supporting
documentation
Documentary
Direct requirements
Prior approval
investment
is required for for royalties,
through equity
loan funds –
or loan capital, services,
limitations on
or a
interest rate interest etc
combination
DbiA Namibia and Botswana – April 2019 33Bank of Namibia
Requirements
Bank of Namibia Requirements
The procedures:
• Applicable to Loans and Shares/Dividends
• 3:1 ‘Thin Capitalisation’ Ratio;
• Prior approval:
- Loan applications
- Loan agreement
- Amortisation schedule
- Interest rates
- Payment dates
DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 34Tax Framework
Tax Framework 4.1 Tax Overview 4.2 Tax Incentives 4.3 Structuring DbiA Namibia and Botswana – April 2019 36
Tax Framework
Overview
Item Tax or Levy Type Rate
Non-mining companies – 32%
Diamond mining companies – 55%
1 Corporate Income Tax Mining companies (other than diamond) – 37.5%
Long term insurance companies (40% x 32%) – 12.8%
Petroleum companies (exploration, development and production operations) – 35%
10% withholding tax (where more than 25% shareholding is held by a company)
2 Dividends paid to non-residents 20% in all other cases
(DTA relief may apply)
3 Capital gains Sale of mining rights and/or petroleum licenses
4 Individual Income Tax Ranges between 18% and 37%
5 Value Added Tax 15%
6 Import VAT 16.5%
7 Property Transfer Tax 0% - 12%
8 0.9% (employee)
Social Security
0.9% (employer)
PwC Namibia Tax Rate and Reference Card Link: https://www.pwc.com/na/en/publications/namibia-tax-rate-card.html
DbiA Namibia and Botswana – April 2019 37Tax Framework
Overview
Item Tax or Levy Type Rate
9 Stamp duties 0.2% – 1.2%
10 Mining royalties 2% – 5%
11 Transfer pricing Acknowledge OECD Guidelines
12 Paid to non-residents - 10%
Withholding tax on interest
Paid to resident persons (other than Namibian Companies) - 10%
13 Withholding tax on royalties 10% of amount paid to non-residents (DTA relief may apply)
14 Withholding tax on services 10% of amount paid to non-residents (DTA relief may apply)
In terms of double taxation agreements that Namibia has concluded, when a
15 permanent establishment is created in Namibia, it will give Namibia a taxing right on
Permanent Establishment
income derived from such a permanent establishment. Income tax is levied at the
corporate tax rate of 32%
16 Duty payable on electric filament lamps (N$3.00 per lamp), all pneumatic tyres -
Environmental levies new, used or re-treaded (N$10.00 per tyre) and carbon dioxide emissions for
certain vehicles (rate varies per level of emission).
PwC Namibia Tax Rate and Reference Card Link: https://www.pwc.com/na/en/publications/namibia-tax-rate-card.html
DbiA Namibia and Botswana – April 2019 38Tax Framework
Overview
Item Tax or Levy Type Rate
17 Export levies 0% – 2%
18 Any amount received from the sale, donation, expropriation, cession, grant or other
alienation or transfer of ownership of a licence or right to mine minerals, petroleum
license or right to extract petroleum, is specifically included in the definition of ‘gross
Indirect disposal of shares in companies holding
income’ for income tax purposes.
(directly or indirectly) a mining right or petroleum license
Legislation makes provision for the deduction of certain costs against the
consideration/market value, provided that it does not create a loss.
19 Group relief No group relief available
20 Other considerations Customs duties, Excise duties and Municipal duties
PwC Namibia Tax Rate and Reference Card Link: https://www.pwc.com/na/en/publications/namibia-tax-rate-card.html
39
DbiA Namibia and Botswana – April 2019Cost of Non compliance • Late filing penalties: N$100 per day • Late payment penalties: 10% per month • Interest : 20% per month • No VDP, had Tax Amnesty program with sunset date • Penalties, removal of “pay now fight later”, can apply waiving with good cause shown, limited opportunity • Interest no waiving opportunity DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 40
Tax Framework
Proposed Amendments – Income Tax
Item Proposed Tax Implementation or Change Amendment detail
1 Repeal the EPZ Act and introduction of Special
EPZ Economic Zones (with
sunset clause).
2 Basis of taxation Taxing foreign income of Namibian residents.
3 Non-diamond mining entities will not be allowed to deduct royalty charges
Non-deductibility of royalties
4 Tax Incentives Phasing out manufacturing incentives.
5 Trusts Providing for specific taxation of trusts and abolishing the conduit principle
6 Charitable, religious and educational institutions Taxing commercial income of charitable, religious, educational institutions.
7 Fees not deductible unless WHT withheld Limit the deductibility of fees and interest for income tax if no WHT has been paid
8 Dividends Tax Levying of a 10% dividends tax on Namibia residents
9 To increase the maximum deduction threshold from N$40,000 per tax year to a
Deductions allowed on pensions & annuity funds
27.5% of income, limited to N$150,000 per tax year.
DbiA Namibia and Botswana – April 2019 41Tax Framework
Proposed Amendments – Indirect Taxes
Item Proposed Tax Implementation or Change Amendment detail
1 Listed Asset Managers Levying of Value-Added Tax on the income of listed asset managers.
2 Levying of Value-Added Tax on the sale of shares or member’s interest of a
Sale of shares or members interest in a PropCo
company which owns a property.
3 Fuel levy increases An increase of fuel levies by 25cents per litre
4 Expansion of export levy Export levy expansion on agricultural, forestry, game and mining products.
5 Remove zero rating of sugar Removal of VAT zero rating in respect of sugar
6 Export of dimension stones Increase export levy on dimension stones from current 2% to maximum of 15%
7 Introduction of timber export levy To impose an export levy of 15% for timber specifically
8 Levy of N$1.80 per litre on lubricant oil, 5% environmental levy on primary
Lubricant oil, batteries and plastic bags
cells/batteries, levy on plastic carrier bags
42Tax Framework
Uncertain Amendments – no further clarity provided
Item Proposed Tax Implementation or Change Amendment detail
1 Introducing specific thin capitalisation rules to combat transfer pricing on interest
Thin capitalisation rules
paid on foreign loans.
2 Betting and gaming activities Taxed at 37%
3 Individual Tax:
a) Lower bracket – 17% from 18%
b) Higher brackets
Individual income tax brackets
> N$1.5mil 39%,
> N$2.5mil 40%
4 National sin tax Additional National Sin Tax on Alcohol and Tobacco products levied at 5%
5 Carry forward of tax losses Limit the carry forward of tax losses to 5 years
6 Capital allowances Change capital allowance on moveable assets from 3 years to 5 years
7 Dividend definition Changes to include all distributions and share buy backs
8 Prohibited deductions Foreign loss, distributions by trusts to beneficiaries
9 Tax credits Providing for foreign tax credits
DbiA Namibia and Botswana – April 2019 43Tax Framework
Paying Taxes Namibia ranked 81st
for ease of paying taxes
out of 190 economies
20.7% 302 27
Total Tax Rate (%) Time to comply (hours) Number of payments
The total tax and contribution rate Time is recorded in hours per year. The tax payments indicator reflects the
measures the amount of taxes and The indicator measures the time taken total number of taxes and contributions
mandatory contributions borne by the to prepare, file and pay three major paid, the method of payment, the
business in the second year of types of taxes and contributions: the frequency of payment, the frequency
operation, expressed as a share of corporate income tax, value added or of filing and the number of agencies
commercial profit. sales tax, and labor taxes, including involved for the standardized case
payroll taxes and social contributions. study company during the second year
of operation
PwC Paying Taxes 2019 Link: https://www.pwc.com/gx/en/services/tax/publications/paying-taxes-2019.html
DbiA Namibia and Botswana – April 2019 44Tax Framework
Paying Taxes
In Southern Africa, Zimbabwe 242
Namibia ranks last for South Africa 210
Zambia 164
Namibia ranked 4th, the amount of hours in a Namibia 302
for the ease of year it takes to comply Botswana 120
Zambia #17
paying taxes in with taxes.
South Africa #46
comparison to
Botswana #51
neighbouring
countries: Namibia #81
‘Total Tax & Contribution
Angola #104
Rate’ underlines the fact, that
Zimbabwe #145
this not only includes taxes,
but also compulsory social
contributions borne by the
This is how
Zimbabwe 51 case study company.
Namibia
Namibia 27 15.6%
compares with Zambia
Angola 31
the number of Namibia 20.7%
tax payments South Africa 7 Botswana 25.1%
to our Botswana 34
South Africa 29.1%
neighbouring Zambia 11
Zimbabwe 31.6%
countries.
Angola 49.1%
DbiA Namibia and Botswana – April 2019
45Tax Framework
Permanent Establishment
Only considered where double taxation agreements are concluded with Namibia.
A permanent establishment is defined in the DTA as a “fixed place of business through which the business of an
enterprise is wholly of partly carried on”. It also includes:
- a place of management;
- a branch;
- an office;
- a factory;
- a workshop;
- a mine, an oil or gas well, a quarry or any other place of extraction of natural resources;
- a warehouse, where storage facilities are provided to parties other than the enterprise;
- a guest farm or other operation of a similar nature; and
For South Africa, it furthermore includes:
- a building site, a construction, assembly or installation project or supervisory activities in connection therewith,
but only where such site, project or activities continue for a period of more than six months;
- the furnishing of services, including consultancy services, by an enterprise through employees or other
personnel engaged by the enterprise for such purpose, but only where activities of that nature continue (for
the same or a connected project) within the Contracting State for a period or periods aggregating more than
six months within any twelve-month period.
DbiA Namibia and Botswana – April 2019 46Tax Framework Permanent Establishment Specific considerations: • Risk for PE where person (in Namibia) acting on behalf of an enterprise • Allocation of business profits • Withholding taxes • Elimination of double taxation • Organisation for Economic Co-operation and Development (OECD) guidance DbiA Namibia and Botswana – April 2019 47
Tax Framework
Tax Incentives
Includes:
• Export Processing Zones (EPZ entities)
- No Income Tax;
- No Value Added Tax;
- No Stamp Duty on goods and services required for EPZ
activities;
- No Transfer Duty in respect of acquisition on any immovable
property situated in the EPZ; and
- No import duties on machinery, equipment and raw materials
imported into Namibia for manufacturing purposes.
• Registered Manufacturers
- 17A Remuneration and training allowance, 17B Export
marketing allowance, 17C Export allowance and 17D Land-
based transport allowance.
DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 48Tax Framework
Tax Structuring
Considerations:
1. Repatriation of funds
2. Exit Strategy
3. Which holding location to select?
DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 49Tax Framework
Tax Structuring
Namibia has concluded double taxation agreements
with:
• Botswana
• France
• Germany
• India
• Malaysia
• Mauritius
• Romania
• Russia
• South Africa
• Sweden
• United Kingdom
Proprietary and confidential. Do not distribute. 50
DbiA Namibia and Botswana – April 2019Tax Framework
Structuring considerations
Recipient WITHHOLDING TAX (%)
Dividends Interest Royalties Technical fees, Directors fees
consulting, admin,
management fees
Non-treaty 10 / 20 10* 10 10 25
Botswana 10 10 10** 10** 25
France 5 / 15 10 10** 0 25
Germany 10 / 15 0 10** 0 25
India 10 10 10** 10** 25
Malaysia 5 / 10 10 5 5 25
Mauritius 5 / 10 10 5 0 25
Romania N/A 10 5 0 25
Russian Federation 5 / 10 10 5 0 25
South Africa 5 / 15 10 10** 0 25
Sweden 5 / 15 10 5 10** 25
United Kingdom 5 / 15 N/A 5 0 25
• Namibian companies are taxed at the corporate tax rate on interest received.
• ‘N/A’ means that the provisions of the tax treaty limited the rate to a rate that is higher than the local Namibian rate. It should be noted that a treaty may only provide tax
relief and cannot impose a higher tax rate.
• ** - no relief as the statutory rate is the same as in the DTA
DbiA Namibia and Botswana – April 2019 51Budget Speech 19/20
Budget Speech 19/20
Overview
Revenue as
a % of GDP
29.7%
Spending as
a % of GDP
33.8%
Deficit as a
% of GDP
-4.14%
DbiA Namibia and Botswana – April 2019 53Budget Speech 19/20 Caiundo
Tombua Mavinga Kataba
Cahama
ANGOLA
Overview ZAMBIA
Sesheke
Luiana Livingstone
Opuwo Kongola
Rundu
ZIMBABWE
Debt Stock as NAMIBIA Tsumeb
Debt % of GDP Khorixas
Tsau
Okakarara
Stock Epata
Omaruru Orapa
FY2019/20 Ghanzi
Windhoek Gobabis Mamuno
2018/19 N$87.5bn N$96.3bn 2019/20 49.2% Walvis Bay
Kang
Aranos
BOTSWANA
Maltahöhe
Gaborone
South Atlantic Ocean
Tshabong
Mafikeng
Lüderitz Aroab
Kuruman
Karasburg
Upington
Kimberley
Inflation at USD: NAD Springbok
SOUTH AFRICA
Unemployment
GDP Growth February 2019 Exchange Rate
Rate
(March 2019) De Aar
1.0% 4.4%
NAMIBIA Bitterfontein
Victoria West
37% 0 50 100 150 Kilometers
N$ 14.60 0 50 100 150 Miles
DbiA Namibia and Botswana – April 2019 54Key Considerations
Key considerations
1. New Equitable Economic Empowerment Framework (NEEEF)
2. Foreign Ownership of Agricultural Land
3. Foreign Investment Act (Namibian Investment Centre)
4. Integrated Tax Administration
System (ITAS)
5. Namibia Revenue Agency (NamRA)
DbiA Namibia and Botswana – April 2019
56Key considerations 6. Exploration companies – Indirect Tax (VAT) 7. Harambee Prosperity Plan (HPP) 8. Public Private Partnerships (PPP) 9. National Elections 10. Ancestral land committee DbiA Namibia and Botswana – April 2019 57
In summary
• Significant focus on policy reforms at present
• Projects around PPP is high on GRN agenda
• Foreign Investor confidence not restored and will
take time, however in the delivery of the past two
SONA the President confirmed his commitment
towards developing Namibia and called upon the
public and private sectors to continue promoting
compelling investment opportunities in our
country so as to encourage investments and create
jobs.
DbiA Namibia and Botswana – April 2019 Proprietary and confidential. Do not distribute. 58Contacts
Contacts
What we offer
A team of focussed experts enthusiastic to serve you We will be here tomorrow
In building the largest tax and legal compliance practice in Namibia, our
PwC Namibian’s Business Continuity Processes are accredited by the British Standard Institute.
team consists of Chartered Accountants, Lawyers and professional
experienced tax and company law consultants. We maintain all records electronically.
This means, that: This means that we will not lose your documents and will be able to continue services within days
after a major crisis.
• They work in these technical areas every day;
• They attend monthly training sessions on changing legislation/practises;
and
• As we continuously grow our teams, we have sufficient capacity to assist
you quickly. Global quality standards
We cannot afford to make mistakes. For this reason PwC’s global quality assurance processes
are core to our being - we check ourselves all the time.
And if something slips through, we are responsible and geared to sort it out.
Relationships with Inland Revenue, Ministry of Industrialisation,
Trade and SME Development and other regulatory authorities
• As the largest professional services firm in Namibia, our relationships
and profile with authorities are key to our business.
Namibian knowledge resources
• This means that we invest heavily in building trusting relationships with Stay informed through our publications and training on legislation and best practices in the
them. Namibian business arena. This includes:
• Through this we are able to assist our clients with access to the right • Business Law Quarterly, HR Quarterly and Monthly Tax Newsletters.
teams and people to solve your problems. • Namibian Business and Investment Guide
• Business School training sessions
• Updated on-line tax reference and rate card
DbiA Namibia and Botswana – April 2019 60Contacts
Our Business Set-up Leadership Team
Chantell Husselmann Johan Nel Nelson Lucas Riana Esterhuyse
Partner Partner Partner Associate Director
Tax Leader / Legal Entity Corporate Tax Services Indirect Tax Services Tax Services – Walvis Bay
Compliance Partner johan.nel@pwc.com nelson.lucas@pwc.com riana.esterhuyse@pwc.com
chantell.husselmann@pwc.com T: +264 (61) 284 1122 T: +264 (61) 284 1203 T: +264 (64) 217 736
T: +264 61 284 1327
DbiA Namibia and Botswana – April 2019 61Doing business in Botswana
Agenda 4.1 Country Context 4.2 Business Vehicles 4.3 Immigration and labour law 4.4 Tax Framework 4.5 Budget Speech 19/20 DbiA Namibia and Botswana – April 2019 63
Country context
Country Context
Political
• Next general election October 2019
• Framework of a parliamentary representative
• The leader of the ruling party is allowed only two terms
democratic republic
in power.
• The President of Botswana is both head of state and • The country has maintained political stability since
head of government independence to date
• The country has a multi party system • The current president is Dr Mokgweetsi Eric Keabetswe
• Executive power is exercised by the government Masisi
• Legislative power is vested in both the government and
Parliament
• The Judiciary is independent of the executive and the
legislature
• Botswana is a multiparty constitutional democracy
• Botswana Democratic Party: Ruling since
independence in 1965, still dominating political
environment
• Elections are held every five years
DbiA Namibia and Botswana – April 2019
65Country Context
Legal Framework Customary Law
• Mixed legal system of civil law influenced by the • Prior to the establishment of the Bechuanaland
Roman-Dutch model and also customary and common Protectorate there existed a variety of indigenous legal
law systems living in tribal areas which is now collectively
called customary law.
Sources of Law • The 1891 proclamation instructed the High
Commissioner to respect the native laws.
• The Constitution
• Therefore these indigenous peoples’ laws received
• Customary law recognition but did not get to be incorporated into the
• Common law general law of the country.
• Legislation
• Judicial precedent
The Constitution
• The Constitution is strictly followed in application of any
law.
• The courts’ independence is enshrined in the
Constitution.
DbiA Namibia and Botswana – April 2019 66Country Context
Legal Framework continued
Common Law Developments
• Roman Dutch law is said to be the common law of • Extensive legal reforms made as part of the transition to
Botswana which was inherited from the Cape Colony. free market economy.
• Over the years it has been influenced by the English • New commercial, inward investment, tax and customs
Common law after British protectorate. laws have been introduced.
• Reform of tax system started in 1995.
• The Criminal Law of Botswana is originated from the
• VAT was introduced in 2002.
English and evidence is based on South African Law. In
• Public Sector reforms including simplification of
Botswana, it has been developed over years by
procedures.
statutes passed by the Parliament and Judicial
• Reforms of sector legislation, such as mining and the
decisions.
financial sector.
• IFRS has been adopted.
DbiA Namibia and Botswana – April 2019
67Country Context
Population and economics
• The Botswana economy has been one of the best • Long term downward trend in GDP growth rates,
performing in Africa over many years.
• GDP per capita (PPP) $15 800, growth rate 4.10%
• Botswana has experienced a dramatic growth in (World Bank: 2017).
average real incomes.
• Lowest level of corruption in Africa (TI Corruption
• In the past 50 years the growth was led by the Perceptions Index)
development of diamond mining and export of rough
diamonds, along with the spending by Government of • Investment Grade Credit Rating by Moody’s 2018:
Botswana of tax and related revenues received from A2. Highest in Africa.
diamond mining. • Transformation from predominantly agricultural
• Population: 2 million economy, to primarily mining focused revenues (18%
of GDP - 2017) and in transition to diversify
• Urban population: 60%, principal urban centre – increasingly towards the services sector (Budget
Gaborone 2019).
• High GDP growth between 1970s – 1980s due to • State funded education programs abroad results in
Diamond production ‘brain drain’
• Biggest export partners: Belgium, India, UAE, South
Africa, Singapore, Israel, Hong Kong, Namibia
DbiA Namibia and Botswana – April 2019
68Business Vehicles
Doing Business in Botswana
Comparing Botswana with SA
Rank out of 190
Aspect Botswana South Africa
Ease of doing business 86 82
Starting business 157 134
Construction permits 31 96
Getting electricity 133 109
Registering property 80 106
Getting credit 85 73
Protecting investors 83 23
Paying taxes 51 46
Trading across borders 55 143
Enforcing contracts 134 115
Resolving insolvency 81 66
Source: World Bank – Doing business 2019
DbiA Namibia and Botswana – April 2019Minimum requirements when doing business in
Botswana
Est. Time to Est. Associated
Procedure
complete* costs*
1. Reserve a unique company name 5-10 working days BWP 20
2. Register the company at the Companies & Intellectual Properties 2-3 Weeks BWP300 for application
Authority(CIPA) BWP 60 for certificate
3. Opening a bank account 3-4 Days No charge
4. Receive inspection of company premises 1 Day No charge
5. Apply for a trading license 1 Week License fees:
Min BWP 250
Max BWP 1,500
6. Obtain a tax identification number from BURS 5-10 Days No charge
7. Register for employees for workplace injury insurance 1 Day No charge
DbiA Namibia and Botswana – April 2019 71Industries DbiA Namibia and Botswana – April 2019 72
Company vs Branch
Item Distinction Factors Company Branch
1 Legal personality Yes Yes
2 Tax personality Yes Yes
3 Liability Limited to amount of company's Head office is fully responsible for
share capital the branch's liabilities
4 No. of shareholder Minimum of 1 N/A
5 Registration costs Lower Higher
DbiA Namibia and Botswana – April 2019 73Types of legal entities
A private company limited
A company Limited by guarantee A public company limited by
Type of Legal entity by shares under the
under the companies Act shares under the companies Act
companies Act
Ease of set up and Time Relatively simple but not as fast as Simple and fast Simple and fast
implications companies limited by shares.
Cost of Set Up Low Low Low
Separate legal Existence Yes Yes Yes
Limitation of Liability of Yes Yes Yes
shareholder
DbiA Namibia and Botswana – April 2019 74Immigration and labour law
Immigration
Current market conditions
• Implementation of an internal tracking system
• Technical delays impact lead times
• Current environment – stable with intermittent issues
(delays)
• Work permits generally limited to middle management
and above except where skill cannot be found locally for
junior level positions
• Increased focus on certain professions:
• Need to prove skills, experience and benefit to industry
• Legal, accounting, engineering, construction, medical,
financial, mining and IT Consulting
• Aversion to unskilled labor – should be sourced locally
• Simpler process with expedited processing times
• Scarce skills can be discretionary – e.g. Gardener
DbiA Namibia and Botswana – April 2019 76Immigration
Visas
Established Multinationals: Where a clear benefit to a specific industry exists, the Botswana Investment and
Trade Centre will motivate the need for a work permit application.
Visa exempt Nationals Non visa exempt Nationals
• Receive/Issued upon arrival in • Apply at Consulate in Home country
Botswana prior to travel to Botswana (Lead
• Passport: 6 month validity period time: 7 – 14 working days)
from date of departure
• Present visa at Port of Entry
DbiA Namibia and Botswana – April 2019 77Immigration
Work permits
Short Term Work Permit Long Term Work Permit
• Issued for 90 days • Issued for 1 – 5 years (depending on contract)
• May be renewed / extended if proof of a pending • Advertising the position in a National Newspaper
Long Term work permit application is provided required
and / or urgent project requirements
(Discretionary) • May be renewed / extended if continuing need for
skill exists and proven inability to Identify / train
• Lead time: 7 – 14 days local resource
• Lead time: 2 – 3 months
DbiA Namibia and Botswana – April 2019 78Immigration
General considerations
• Develop key relationships with all stakeholders
• Expectation Management: Immigration
• Authorities prone to unexpected delays (challenges with
internal network system from September 2013)
• Be Flexible: Requirements / procedures subject to change
(Government Notifications coincide with implementation of
changes)
• Be Available: Presentation to Immigration / Labor Department
recommended to build profile of organization with Authorities
• Be Prepared: If all documentary requirements are met (with no
internal delays), permits should be issued timeously
DbiA Namibia and Botswana – April 2019 79Immigration Other considerations Urgent Projects (exceeding 3 months) • Apply for Long Term work permit and Short Term work permit simultaneously Residence Waivers • Required in addition to work permit authorisation • Applied for following arrival in Botswana Accompanying Family Members • Residence waiver linked to main applicant • No separate study permit required Appeal Procedures • Work permit rejections – appeal to be lodged within 30 days of negative decision • Full motivation submitted to Department of Labour • Lead time: 1 – 3 months DbiA Namibia and Botswana – April 2019 80
Tax Framework
Tax Framework
Corporate Tax
Resident company tax 22%
Resident manufacturing (approved) 15%
Non-resident companies /Branches/Permanent Establishment 30%
Capital gains tax – Resident company 22%
Capital gains tax – Non-Resident company 30%
Dividends accruing outside Botswana
15%
International Financial Service Centre Company
• Income from approved financial transactions with non-residents,
IFSC Companies and Specified Collective Investment Undertakings 15%
• All other Income 22%
DbiA Namibia and Botswana – April 2019 82Tax Framework
Withholding tax rates for non DTA countries
Non-
Payments Residents Final tax or advance tax
residents
Interest 10% 15% Final tax for non-residents
Dividends 7.5% 7.5% Final tax for residents if the interest is
from Bank or Building society
Commercial royalties - 15% Final tax
Management and consultancy fee - 15% Final tax
Entertainment fee - 10% Final tax
Construction 3% 3% Advanced tax
Mine rehabilitation 10% 10% Final tax
Payment of rent 5% 5% Advanced tax
Brokeage or commission 10% 10% Advanced tax
DbiA Namibia and Botswana – April 2019 83Double Taxation Agreements
Payment to residents of Dividend Interest Royalties Management,
Consultancy, Technical
fees
Barbados 5%*/7.5% 10% 10% 10%
France 5%*/7.5% 10% 10% 7.5%
India 7.5% 10% 10% 10%
Mauritius 5%*/7.5% 12% 12.5% 15%
Namibia 7.5% 10% 10% 15%
Russia 7.5% 10% 10% 10%
Seychelles 5%*/7.5% 7.5% 10% 10%
South Africa 7.5% 10% 10% 10%
Sweden 7.5% 15% 15% 15%
UK 5%*/7.5% 10% 10% 7.5%
Zimbabwe 5%*/7.5% 10% 10% 10%
Mozambique 7.5% 10% 10% 10%
Zambia 5%*/7% 10% 10% 10%
Ireland 5% 7.5% 5%*/7.5% 7.5%
Swaziland 7.5% 10% 10% 10%
China 5% 7.5% 5% 5%
*Where the beneficial owner is a company and holds 25% of shares or higher 84
DbiA Namibia and Botswana – April 2019IFSC regime
General
The aim is to establish and develop
Botswana as a world class hub for cross
border financial and business services into
Africa and the region
Main benefits
Lower tax rates
IFSC company Normal
company
Capital Gains tax 0% 22%
Value Added tax 0% 12%
Withholding tax 0% 15%
Corporate tax rate 15% 22%
DbiA Namibia and Botswana – April 2019 85IFSC regime - continued
Additional Benefits Key requirements
• Botswana has no foreign exchange control • A business plan that demonstrates the
regulation. capacity to engage in cross-border
financial services.
• Botswana has 16 double tax treaties in
force. • Services must be provided to/for clients
outside Botswana and in currencies other
• Unilateral credit for tax paid outside than the Pula and the promoters of the
Botswana in respect of foreign income project must be able to satisfy the
where Botswana does not yet have a regulatory requirements of the Botswana
Double Tax Agreement. Such credit shall authorities.
be lesser of the tax paid in the other
country or tax payable on such amount in
Botswana.
• The IFSC company is allowed to elect its
functional currency.
DbiA Namibia and Botswana – April 2019 86Tax Framework New tax legislation BURS has introduced a new legislation on • Transfer pricing rules • Thin capitalization rules • The Bilateral agreements have increased to 16 and there are about 13 which are still under negotiations DbiA Namibia and Botswana – April 2019 87
Contacts
PwC Botswana Tax Contacts
Butler Phirie Nilusha Weeraratne
Partner Senior Manager
Tax Leader Tax Services
Compliance Partner nilusha.weeraratne@pwc.com
butler.phirie@pwc.com T: +267 395 2011 (ext. 248)
T: +267 395 2011 (ext. 291)
DbiA Namibia and Botswana – April 2019 89Questions
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DbiA Namibia and Botswana 91Thank you pwc.com © 2018 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms of PricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each member firm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients. PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professional judgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it control the exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.
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