Together thriving again Deloitte commentary on Namibian Budget 2020/21 - Making an impact that matters
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Together thriving again Deloitte commentary on Namibian Budget 2020/21 Making an impact that matters
Budget 2020/21 | Deloitte Commentary
Budget 2020/21
“ As Namibians, we too should not
allow this crisis to go to waste, we are
called upon to develop alternative
ideas and implement them in earnest,
with dexterity, entrepreneurship and
innovation to achieve shared prosperity
for the current generation and for the
better future of our grandchildren."
Minister of Finance
Mr Iipumbu Shiimi, 27 May 2020
2Budget
Snaphot
Finance Minister Iipumbu Shiimi delivered open economy of Namibia is estimated to Preliminary estimates for revenue collected
his maiden Budget Speech against the contract by 6.6 percent in real terms this for FY2019/20 is estimated at N$58.6
backdrop of the State of Emergency year. The Minister’s expectation is that the billion. This is 33.2 percent of GDP and it
declared on 17 March 2020 due to the contraction will continue into 2021 at a line with the revised budget estimate.
COVID19 pandemic. Quoting His Excellency moderate rate of 1.1 percent, with the new
Collected revenue saw better returns
President Geingob in saying “while the normal average growth rates of between
in personal income tax and VAT that
pandemic we are faced with today is 2.0 and 3.6 percent in 2022 and beyond.
counterbalanced the lower collection on
unprecedented, we are confident that working
Both exports and imports are expected to corporate tax.
collaboratively, we will still respond effectively
decline by 11.9% and 14.9% respectively
to minimize the spread of the virus and loss of The projected impact of COVID-19 on the
and all major industry sectors are
life, and restore the health of those affected” economy is estimated to have a significant
expected to post negative growth rates.
negative effect on revenue for FY2020/21
The Minister noted that the health
Monetary policies have been set to afford and projections are:
emergency and the consequent
the business and household sectors a
suppression measures have helped to save • N$51.4 billion revenue, 30.0 percent
cushion to adapt to the adverse impacts
lives, globally and at home. For Namibia the of GDP and 14.3 percent below the
of COVID-19 and as such the Repo rate
containment of the virus thus far resulted indicative MTEF estimates for 2020/21;
was cut twice by a cumulative of 200 basis
in a low number of cases and no deaths as
points to 4.25 percent since the outbreak • SACU revenue N$22.3 billion;
to date. The budget is presented as part
of COVID-19. This is among a low inflation
of the fight against COVID19 with the aim • external and domestic demand shocks
environment (standing at 1.6 percent by
of saving lives and livelihoods and to place and trade disruptions will result in about
April 2020 and estimated to average below
Namibia in a stronger position to thrive 32.8 percent decline in VAT collections;
3 percent for 2020) and private sector
in the foreseeable future. He therefore
credit extension that remained subdued • supply side and production disruptions
themed this year’s budget as “together
(only expanded by 6.7 percent during the would lead to a decline of about 20.3
defeating COVID-19, together thriving
first two months of the year). percent in individual income tax due to
again”.
Stock of international reserves stood at wage reductions and job layoffs across
COVID-19 stimulus packages were various sectors of the economy; and
about 4.6 months of import cover by the
announced during the course of April 2020
end of April 2020. The Minister commented • corporate income tax is estimated to fall
and we will elaborate on them later.
that this level of reserves is adequate to by about 25.5 percent.
The global real GDP for 2020 is now meet international obligations and support
forecasted by the International Monetary the currency peg. On the expenditure side for 2019/2020 the
Fund (IMF) to contract by 3.0 percent Minister highlighted the following:
Fiscal snapshot 2019/2020
this year, from what could have been a
3.4 percent positive growth forecasted With Government’s fiscal consolidations • preliminary expenditure outturn stood at
in October 2019. The South African GDP measures implemented in recent times, N$66.8 billion;
contraction is estimated at 5.8 percent total expenditure slowed to about 37.7 • the non-interest operational budget
while the Angolan economy is projected percent of GDP by FY2019/20, from a high execution rate estimated at about
to contract by 1.4 percent. The small, of 42.8 percent in FY2015/16. 99.5 percent;Budget 2020/21 | Deloitte Commentary
• development budget execution rate Budget 2020/2021 • development budget amounts to N$6.4
stood at 83.2 percent; billion, 8.4 percent more than the actual
Due to uncertainties created by the
development budget spending in the
• the budget deficit is estimated at 4.7 COVID-19 pandemic, the Minister
previous year;
percent of GDP, compared to 4.1 percent announced a single-year budget totaling
as budgeted, mainly due to revisions in N$72.8 billion. The single-year budget aims • budget deficit for FY2020/21 is estimated
nominal GDP; to address the once-off needs that are at 12.5 percent of GDP. The budget deficit
arising from the impact of COVID-19. will be financed through a combination of
• public debt as a percentage of GDP stood
own savings and domestic and external
at 54.8 percent; and Main budget items are:
borrowing;
• debt servicing as a percent of revenue • non-interest operational expenditure is
• debt stock is estimated to rise to N$119.1
stood at 13.5 percent and contingent budgeted at N$57.9 billion, 8.8 percent
billion, corresponding to 69.6 percent of
liabilities of Government were more than the previous year;
GDP, from 54.8 percent estimated for
approximately 6.3 percent of GDP
FY2019/20.
relative to the 10 percent maximum cap.
4Budget 2020/21 | Deloitte Commentary
COVID Stimulus packages update
The Economic Stimulus and Relief Package, the benefits have been made at the • granting of the policy relief to borrowers
announced by Government during April Social Security Commission as an and policy holders and members in the
2020 included ten main points being: implementing agency. non-banking financial sector. Gazetting in
collaboration with NAMFISA ;
• acceleration of payment of overdue
• An emergency budget of N$727 million
unpaid invoices for suppliers of goods • a one-year tax-back loan scheme
was frontloaded to the health sector;
and services to the Government valued capped at N$470 million for non-mining
• an Emergency Income Grant, providing at N$1.2 billion were paid out; corporates;
a once-off payment of N$750 to a
• at 31 March 2020 outstanding VAT • a similar scheme for individuals capped
targeted low-income group affected by
refunds were estimated at N$3.0 billion at N$1.1 billion;
COVID_19 was rolled out. A total of 747
of which N$1,8 billion have been paid
281 Namibians have so far benefited • provision of a water subsidy of N$80
out;
from the grant at a cost of N$561.96 million under the Ministry of Agriculture,
million. A further 120, 000 people are • non-agricultural SME loan scheme Water and Land Reform to avail water to
expected to benefit after completion of at DBN, for which a N$500 million all communities;
the verification process; Government guarantee is provided,
• waiving of levies and duties on kerosene
• the National Employment and Salary • agricultural business loan scheme and fuel as a basic consumer goods; and
Protection Scheme for COVID-19 bridging finance for AgriBank for which
• an emergency budget of N$600 million is
was launched on 10 April 2020 in N$350 million Government guarantee
availed to the Ministry of Basic Education,
collaboration with the Social Security is provided. The stimulus and relief
Arts and Culture for the provision of
Commission. To date, over 1,372 program by AgriBank will start on 1 June
water, ablution facilities and hostels at
applications from employers to access 2020;
about 193 schools, countrywide.
Size of stimulus package compared to country GDP
China
New Zealand
Australia
Peru
Singapore
Italy
France
Germany
Japan
South Africa
United States
Botswana
Namibia
0.00% 5.00% 10.00% 15.00% 20.00% 25.00%
5Budget 2020/21 | Deloitte Commentary
Tax policy proposals
Tax Policy Proposals Personal income tax brackets biodiesel 120 cents/litre (increased from
95 cents/litre).
The Minister noted that this is not a time to Personal income tax brackets have last
introduce new taxes. Therefore no changes been changed in 2013 and although Special Environmental Duties on
were announced to individual income tax we understand the Minister’s one-year importation of lubricants and plastic bags
rates, corporate tax rates and indirect budget in the current circumstances, these were introduced on 2 August 2019.
taxes, apart from sin taxes. brackets are now clearly out of line with
Manufacturing incentives and Export
inflation.
The Minister did however note that tax Processing Zone amendments
administration measures to achieve Excise duties on alcohol and tobacco
The former Minister of Finance tabled the
equity and fairness in the tax system will
In line with the SACU agreement the first income tax amendment bill of 2020
be pursued. Measures to combat tax
following increases are applicable from 27 in Parliament on 19 February 2020. The
planning and tax avoidance opportunities
February 2020: bill repealed the tax incentives applicable
will also continue to be pursued. He also
to registered manufacturers and export
put out a warning that all Namibians that • a 340ml can of beer or cider will cost an
processing zones (“EPZ”). This is in part,
earn above the tax threshold of N$ 50 extra 8c;
to comply with the requirements of the
000, irrespective of the type of economic
• a 750ml bottle of wine will cost an extra European Union (“EU”) for the removal of
activity, must pay tax.
14c; Namibia from the list of non-cooperative
For the Minister’s comments on the jurisdictions as such incentives are
• a 750ml bottle of sparkling wine will cost
amendment bill relating to manufacturing regarded by the EU as harmful preferential
an extra 61c;
and export processing zone – see our tax treatment. The ministry has also
comments later in this document. • a bottle of 750 ml spirits, including conducted a review of the EPZ and
On the various other income tax and VAT whisky, gin or vodka, will rise by N$2.89; manufacturing incentives and found that
changes that have been proposed by they have not yielded the benefits that
• a packet of 20 cigarettes will cost an
the Ministry of Finance over a period of were initially expected.
extra 74c;
time, the Minister noted that extensive In our view, the amendments are not
consultation will be conducted with • a 25 gram of piped tobacco will cost 40c
aligned to Namibia’s objective of becoming
stakeholders before a decision is made more, and
an industrialized economy. This was also
on the way forward. We have prepared a • a 23 gram cigar will cost an extra N$6.73. confirmed by the High-Level Panel on the
summary of these on the next page. Namibian Economy (HLPNE) and noted
With alcohol sales and exports that have
Tax administration that “unless a suitable framework is created to
been prohibited since 27 March 2020 we
benefit manufacturing entities, we believe the
The Minister noted the following tax expect the Ministry to have a substantial
country will become even less attractive for
administration measures: lower excise collection in 2020/2021
foreign investment and we will not meet our
compare to the prior year.
envisioned plans to become an industrialized
• Implementation of the transitional
Environmental levies nation.” The HLPNE recommended that the
arrangements for the establishment
amendment be suspended until a suitable
of the Namibia Revenue Agency by No further announcements were made
alternative has been implemented. Despite
commencing with the recruitment drive, regarding increases and/or changes in
the recommendation the amendment bill
environmental levies, plastic levies and fuel
• improving the tax administration to was submitted to Parliament.
levies.
ensure compliance with tax laws and,
The repeals will become effective from a
improving the efficiency of domestic The previous amendment to these evies
date to be determined by the Minister by
tax collection, assessment and forensic were on 2 August 2019. Changes were
notice in the Government Gazette. This
audit, made to carbon taxes and environmental
means that even if the amendment bill is
levies on the importation of tires. On that
• improving the functionality of the passed and gazette, it will only become
day fuel levies were increased for:
Integrated Tax System to leverage service effective at a future date as determined by
innovation embedded in the new system, • Petrol, distillate fuel and biodiesel, 90c/ the Minister.
and litre (increased from 65c/litre)
• leveraging regional and international tax • Illuminating kerosene, Specified aliphatic
cooperation. hydrocarbons solvents and Other
6Budget 2020/21 | Deloitte Commentary
The EPZ regime will be replaced by the • A 25% allowance on the land-based • The exemption on imports of goods and
Special Economic Zone (SEZ) regime. transport (road and rail) costs of services by an EPZ/ into any EPZ are from
Details are yet to finalization, but the policy materials and components used in the outside Namibia.
framework will define the governance manufacturing activities and imported
structure, applicable investment incentives equipment used in the manufacturing This means that a supply by a Namibian
and guide the transition from EPZ and process for ten years. VAT registered person to an EPZ will still
Manufacturing Incentives Regimes to be zero-rated. Also, an import by an EPZ
• 80% allowance on exports of goods or services from outside Namibia
the SEZ incentives. The SEZ regime will
strengthen the investment incentive Export Processing Zone will still be exempt from import VAT.
policy function in Namibia. It is important What has changed and what has not It is somewhat peculiar that the repeal
to note here that aspects that were changed? of the provisions mentioned above are
classified as harmful in the EPZ regime, of done through the income tax amendment
Entities that applied for and received EPZ
course cannot be re-introduced in the SEZ bill as these are listed in the EPZ Act and
status or that are operating within an EPZ
incentive package. VAT Act. We would have expected those
were subject to various tax exemptions.
Registered manufacturers The amendment bill repeals some of those provisions to be repealed through an EPZ
What has changed and what has not exemptions. The exemptions that will no Amendment Act and VAT Amendment Act.
changed? longer be available to taxpayers with EPZ
The amendment bill repeals the provisions status are:
that allowed Inland Revenue to register, • Stamp duties applicable to instruments
on application, taxpayers that conduct relating to the transfer, hypothecation
manufacturing activities as registered or lease of movable and immovable
manufacturers. Inland Revenue will properties located in an EPZ;
therefore no longer register manufacturers
as registered manufacturers for income • The payment of transfer duty on the
tax purposes. We also assume that acquisition of immovable property
applications that have not been processed located in an EPZ; and
or finalised yet will not be entertained any • The payment of income tax by an EPZ
further. management company and an EPZ
The amendment further states that approved entity in respect of income
current registered manufacturers will derived in an EPZ.
no longer enjoy special tax deductions
The bill also amended the provision
/ incentives. The tax incentives that will
relating to the movement of goods from
no longer be available to registered
Namibia to an EPZ and from an EPZ to
manufacturers are:
Namibia. Such movements will no longer
• A tax rate of 18% for ten years; be regarded as an export from Namibia
and an import into Namibia. It follows that
• A 25% allowance on the remuneration
customs duties, import control provisions
and training costs related to
and import VAT will no longer apply to the
manufacturing activities;
movement of goods as such. However, we
• A 25% allowance on marketing and noted that the specific provisions in the
advertising related expenses in respect Value-added Tax Act relating to EPZ entities
of exported goods manufactured or have not been repealed - those are:
produced in Namibia; and
• The zero-rating of supplies made to EPZ
entities; and
7Budget 2020/21 | Deloitte Commentary
Status of previous tax proposals
Tax Proposals Mid year budget HLPNE recommendation Budget statement 2021
October 2019
Moving to a residency/ hybrid tax Still under consideration Delay for indefinite period No specific comment was made,
system potentially still under review but
with consultations to take place
Taxation of trusts as companies Certain to be tabled Tax only trading trusts Still under review with
Eliminating base eroding tax Certain to be tabled consultations to take place
holidays and preferential tax rates
Removing conduit pipe principle
Introduction of 10% dividend Certain to be tabled Delay for indefinite period Still under review with
withholding tax for residents consultations to take place
Taxation of commercial activities Certain to be tabled Tax trade activities only Still under review with
of charitable, educational & consultations to take place
religious institutions
Phasing out manufacturing tax Certain to be tabled Agree if SEZ introduced Implementation this year
incentive
Introduction of Special economic Certain to be tabled
Zones
Changing wear & tear claim to Unlikely to be tabled No recommendation No specific comment was made,
5 years potentially still under review but
with consultations to take place
Prohibited deductions – Royalties Under consideration Recommend suspension of Proposal withdrawn
Prohibited deductions – Royalties Unlikely to be tabled introduction
for diamond mining entities
Prohibited deductions – Foreign Certain to be tabled No comments No specific comment was made,
losses potentially still under review but
with consultations to take place
Assessed losses to be capped at Unlikely to be tabled Suspend for indefinite period No mention
5 years
Proposal to change individual tax Unlikely to be tabled No specific recommendation No mention
tables
N$ 0 - N$ 50 000 Not taxable
N$ 50 001 - N$ 100 000 N$ 0 + 17%
N$ 100 001 - N$ 300 000 N$ 8 500 + 25%
N$ 300 001 - N$ 500 000 N$ 58 500 + 28%
N$ 500 001 - N$ 800 000 N$ 114 500 + 30%
N$ 800 001 - N$ 1 500 000 N$ 204 500 + 32%
N$ 1 500 001 - N$ 2 500 000 N$ 428 500 + 39%
Over N$ 2 500 001 N$ 818 500 + 40%
Formalizing the 3:1 thin Certain to be tabled No comment at time report was No mention
capitalization ratio issued
Introduction of VAT on income of Certain to be tabled No mention Still under review
listed fund managers
Introduction of VAT on property Still under consideration No mention No mention
share transactions
Contributions to retirement funds Certain to be tabled No mention No mention
increased to 27.5% of income
with N$ 100 000 limit (March
2019 Budget Speech – N$150
000)
Increase the export levy for Certain to be tabled No mention No mention
dimension stones
Introduce export levy for timber Certain to be tabled Consultation to be undertaken
Investigating introduction of New on the table – but potentially No recommendation No mention
a lower tax regime for small a revisiting or expansion of the
businesses as a means of Presumptive Tax Regime first
encouraging entrepreneurship mentioned in 2014
and business growth.
Proposals for Namibia to join Certain to be tabled Only mention in general terms
in exchange of information for
tax purposes and ratify the
OECD Convention on Mutual
Administrative Assistance
Capital gains tax No mention No mention
Transfer duty on property owning No mention No mention
company/close corporation
8Budget 2020/21 | Deloitte Commentary
Contacts
For more information, contact your nearest Deloitte tax office.
Gerda Brand: gbrand@deloitte.co.za
Olivia Nghaamwa: onghaamwa@deloitte.co.za
Indileni Nambala: inambala@deloitte.co.za
Katja Büttner: kbuttner@deloitte.co.za
Never Muleya: nmuleya@deloitte.co.za
Aron Haifene: ahaifene@deloitte.co.za
Shoopala Angombe: sangombe@deloitte.co.za
Marikka Nekwaya: mnekwaya@deloitte.co.za
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1This guide is based on the Budget proposals tabled in Parliament by the Minister of Finance on 27 May 2020. These proposals are, however, subject to approval by Parliament. The information contained in this guide is for general guidance only and is not intended as a substitute for specific advice in considering the tax effects of particular transactions. While every care has been taken in the compilation of the information contained herein, no liability is accepted for the consequences of any inaccuracies contained in this guide. © 2020 Deloitte & Touche. All rights reserved. Member of Deloitte Touche Tohmatsu Limited
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