Doing Business in Africa: Namibia and Botswana · Country context Socio-economical • Namibia is...

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Doing Business inAfrica: Namibia andBotswana

Agenda

1 Why this seminar

2 PwC Africa desk

3 Doing business in Namibia

4 Doing business in Botswana

Doing business in Africa: Namibia2

21 January 2014

PwC

Why this seminar?

3August 2013

Why this seminar?

The interest in investing in Africa is growing rapidly

Need for general as well as specific hands-on information and ability todiscuss developments

PwC Africa Desk to facilitate this by, amongst others, organising“Doing business in Africa” seminars:

- Zambia (March 2013)

- Mozambique (August 2013)

- Namibia / Botswana (January 2014)

- More to come!

421 January 2014

PwC Africa Desk

5

Other ways the Africa desk may support you

6

One-stopservice

Because of helicopterview, identification ofother cross-country

alternatives

Thought leadership throughAfritax newsletter, One page taxsummaries per African country,

country seminars, etc

Quick responses ongeneral and specific

questions

Proactivelyinform relevantparties on newdevelopments

Doing business in Africa 21 January 2014

The PwC presence in Africa

In Africa…

• Member firms in 31 countries with over7,360 professional staff.

• We have the largest footprint ofprofessional services on the Africancontinent.

• All our African firms are locally-owned.

• Provide a range of professional businessadvisory services to the public andprivate sectors throughout thecontinent.

• Committed to the development andprosperity of the African people andeconomies.

7

Algeria

Tunisia

Egypt

Sudan

SouthSudan

Mauritania

WesternSahara

Niger

Chad

Ethiopia

Kenya

DemocraticRepublicof Congo

Nigeria

Ben

in

Togo

Gha

na

CôteD’Ivoire

Liberia

Sierra Leone

Guinea

SenegalGambia

Guinea Bissau

Equatorial GuineaGabon

Angola

Zambia

Ma

law

i

Namibia

Botswana

SouthAfrica

Lesotho

Swaziland

Mauritius

Comores

Seychelles

Mayotte

Cape Verde

PwC member Firms

Mali

Rwanda

Burundi

Tanzania

Libya

For services in these territories

please contact a neighbouring territory

Doing business in Africa 21 January 2014

Doing Business inAfrica: NamibiaPwC Namibia21 January 2014

www.pwc.com/na

Contents


21 January 2014

3. Country context

4. Business vehicle

4.1 Type of entities

4.2 Company vs branch

5. Legal and Labour

5.1. Legal system at a glance

5.2. Labour

6. Tax Framework

6.1 Tax Overview

6.2 Tax Incentives

6.3 Structuring

7. Key Issues

8. Contacts

Country Context

Slide 10

Country Context

Country contextPolitical

• Namibia has strong democratic foundations;

• SWAPO, ruling since independence in 1990, still dominating thepolitical environment;

• SWAPO is expected to maintain power and majority in the upcominggeneral election scheduled for later this year;

• It will be the 5th free and fair election

• The President, who is elected by direct popular vote for a term of fiveyears and can be re-elected for a second term of office;

• His Excellency Hifikepunye Pohamba, current president of Namibiawill finish his second term in 2015;

• Namibia enjoys a stable political environment.


21 January 2014

Country contextSocio-economical

• Namibia is the world's 34th largest country at 825,615 km2 with apopulation of approx. 2.2 million and GDP of R104bn in 2012/13.

• Namibia falls within upper-middle-income economies for incomeper capita.

• Some social tension with increasing gap between rich and the poor.

• Employment is biggest challenge for Government.

• Average inflation rate for 2012 was 6.5% compared to the 5.0%recorded in 2011;


21 January 2014

Country contextSocio-economical

• Exports mainly mining - diamonds and uranium.

• Key trading partners - European Union and South Africa;

• Policy framework for national development - “Vision 2030”.

• Capital city, Windhoek - clean, loved by expats but ranked as the150th most expensive city in world.

• Growth in coastal town – mining and Walvis Bay Port


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Business Vehicle

4.1. Types of Entities

4.2. Company vs Branch

Public or Private Company

Branch of a Foreign Company

Close Corporation

Partnership, including joint venture

Sole proprietor

Business Trust

Business vehicles

Business may beconducted in Namibiain a variety of forms,as follows:


21 January 2014

Business vehiclesBusiness entities incorporation


21 January 2014

Registrar of Companies

Inland Revenue - income, consumption, withholding and employeetaxes.

The Social Security Commission as employer as well as for Employee’sCompensation where applicable

Appropriate governing body for the trade or industry in which thebusiness operates;

Local municipal health department for the appropriate registrationcertificate

Business Vehicles

4.1. Types of Entities

4.2. Company vs Branch

Business vehiclesCompany vs branch


21 January 2014

Item Distinction factor Company Branch

1 Legal personality Yes That of the parentcompany

2 Tax personality Yes Yes

3 Liability Limited toshareholding

Limited toshareholding

4 No. of Shareholders 1 – 50 1 – 50

5 Incorporation/Registration costs

Lower Higher

6 Stakeholder’sperception

Long-termpresence

Short-termpresence

Business vehiclesCompany vs branch


21 January 2014

Item Distinction factor Company Branch

7 Audited Accounts Mandatory Mandatory (Separatetax calculation)

8 Taxation of dividends 10% or 20%WHT onDividends declared

Possible DTA relieffrom WHT

9 Liquidation/closure Complex Complex

10 Annual duty (min.N$80, N$4 per 10 000shares or part thereof)

Based on local sharecapital

Based on foreigncompany share capital

11 Shareholders /Directors n/a All foreignshareholders anddirectors must beshareholders ordirectors of branch

Legal and Labour

5.1. Legal System at a glance

5.2. Labour

Legal and LabourLegal system at a glance

• Namibian law is rooted in South African legislation and legalprinciples;

• Judiciary operates with total independence;

• The government is committed to a free market economic system, topromote private sector development.

• No Electronic Communications Act


21 January 2014

Legal and Labour

5.1. Legal System at a glance

5.2. Labour

Legal and LabourLabour

Investor Considerations

• Abundant supply of unskilled labour.

• Shortage of skilled labour.

• Compulsory social security costs include workers’ compensation,maternity leave, sick leave and death benefits.

• Employment equity legislation in force.

• Vocational and Education Training(Skills) levy is proposed.


21 January 2014

Legal and LabourLabour

Immigration documents applicable to foreign employees:

• Business Visa valid up to 3 months (non-productive)

• Work Visa valid up to 3 months (productive)

• Work Permit for periods more then 3 months


21 January 2014

LabourRemuneration trend Analysis @ TGP Namibia vs SA


21 January 2014

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

1800000

2000000

E4 E3 E2 E1 D5 D4 D3 D2 D1 C5 C4 C3 C2 C1 B5 B4 B3 B2 B1 A3 A2 A1

Namibia National Median

South Africa National Median

Expon. (Namibia National Median)

Expon. (South Africa NationalMedian)

LabourRemuneration Trend Analysis @ TGP Mining - Namibia vsSA


21 January 2014

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

D5 D4 D3 D2 D1 C5 C4 C3 C2 C1 B5 B4 B3 B2 B1 A1

Namibia Mining Median

South African Mining Median

Expon. (Namibia Mining Median)

Expon. (South African MiningMedian)

Tax Framework

6.1 Tax Overview

6.2 Tax Incentives

6.3 Structuring

Tax frameworkOverview


21 January 2014

Tax Rate

Corporate Income Tax Non-Mining Companies: 33%Mining (not diamonds) Companies: 37,5%Diamond mining companies: 55%Petroleum companies: 35%Long-term Insurers: 13,2%

Dividends 20% withholding tax ( less than 25%)10% withholding tax (more than 25%)

Capital Gains None

Individual Income Tax 18% - 37%

VAT 15% (Import VAT 16,5%)

Property Transfer Tax 0% - 12%

Social Security 0,9% (employee)0,9% (employer)

Tax frameworkOverview


21 January 2014

Tax Rate

Stamp Duties 0,2% - 1,2%

Mining royalties 2% - 5%

Transfer Pricing Acknowledge OECD Guidelines

Other Customs Duties, Excise Duties and Municipal duties

Tax frameworkProposed amendments


21 January 2014

Tax Amendment

VAT threshold Expected to increase from N$500 000 to N$1 000 000

Voluntary VAT registration Deregistered if threshold not exceeded within first 2 years

Import VAT registration Criteria prescribed by Commission for new and currentregistrations

Export levy on raw minerals 0-2%

Environmental levies Tyres, light bulbs, carbon emission

Transfer duty Property holding companies/Cc’s

Training levy 1-1.5% of payroll

Tax frameworkTax overview


21 January 2014

Link toThe Namibia Tax Rate and Reference Card:

http://www.pwc.com/na/en/namibia-tax-rate-card/index.jhtml

Reference & Rate CardOctober 2013

Namibia Tax

www.pwc.com/na

Tax frameworkTax overview

Ease of paying taxes


21 January 2014

314 3421,8

Total TaxRate (%)

Number ofpayments

Time(hours)

Tax Framework

6.1 Tax Overview

6.2 Tax Incentives

6.3 Structuring

Tax frameworkTax incentives

• Registered Manufacturers

• Export Processing Zone (EPZ entities)


21 January 2014

Tax Framework

6.1 Tax Overview

6.2 Tax Incentives

6.3 Structuring Considerations

Tax frameworkStructuring considerations


21 January 2014

Whichholding

location tochoose?

Exitstrategy

Repatriationof Funds

(incl Forex)



21 January 2014

Namibia concluded DTA’s with:

Botswana South Africa

Malaysia Sweden

Mauritius United Kingdom

Romania Germany

Russia India

France



21 January 2014

RecipientWHT (%)

Interest Royalties Technical fees Directors fees

Non-treaty 10* 10.2 25 25

Treaty:

Botswana 10 10 15 25

France 10 10 0 25

Germany 0 10 0 25

India 10 10 10 25

Malaysia 10 5 5 25

Mauritius 10 5 0 25

Romania 10 5 0 25

Russian Federation 10 5 0 25

South Africa 10 10 0 25

Sweden 10 5 15 25

United Kingdom N/A 5 0 25



21 January 2014

Withholding tax on Dividends (NRST)

Country - Companyreceiving dividend % Shareholding NRST %Botswana N/A 10%France <10% 15%

>10% 5%Germany <10% 15%

>10% 10%India N/A 10%Mauritius <25% 10%

>25% 5%

Romania N/A10% - 15% depending onshareholding

Russian Federation

<25% or>25% and have directly invested lessthan USD100,000 in the equity capitalof the company paying the dividend 10%

>25% and have directly investedUSD100,000 or more in the equitycapital of the company paying thedividend

5%



21 January 2014

Withholding tax on Dividends (NRST)

Country - Companyreceiving dividend % Shareholding NRST %South Africa <25% 15%

>25% 5%Sweden <10% 15%

>10% 5%

United Kingdom <50%15% (1-24% interest)10% (25%- 49%)

>50% 5%Malaysia <25% 10%

>25% 5%


• Create a gateway through SA for holdingAfrican activities, amongst whichNamibia.

• Benefits of SA head quarter company:

• No withholding tax on dividend,interest and royalties to parent

• Participation exemption on dividendincome

• Limited exchange control

• No transfer pricing

• Treaty access

• CGT participation exemption ondisposal of assets

• “Look through” for CFC purposes

• Strict requirements to be met to qualify


21 January 2014

SA HQcompany

AfricanOpco

SA activities

HoldCo

AfricanOpco

NamibianOpco

Key Issues

Key issues


21 January 2014

InlandRevenue’scompliancedrive

Drastic action byInland Revenue.Taxpayers warned onoutstanding returnsand pay arrear taxes.Suspended Import VATaccounts.

Key issues


21 January 2014

non-compliancepenalties andinterest

• N$100 a day for latesubmission of VAT,Import VAT andprovisional tax returns.

• 10% penalty for latepayment

• Interest levied at 20% p.a.• Interest cannot be waived

Key issues


21 January 2014

ASYCUDAandImport VAT

• ASYCUDA records theimport into Namibia

• IR compare Import VATclaims to ASYCUDA recordswhen assessing

• Mismatches may result inunder-declarations

Key issues


21 January 2014

New DTAframework

• Government is in process ofdrafting national modelframework for future DTAagreements andnegotiations;

• All current negotiations havebeen postponed tillframework is final

Key issues


21 January 2014

Employee Taxes:Increased IRfocus

• Penalties and interestcommon with multinationals

• Incorrect tax treatment bycentralised payroll functions

• Manual system –reconciliations of PAYEcertificates

Key issues


21 January 2014

25% WithholdingTax on Services(consulting,technical andadmin fees)

• Currently DTA reliefapplied;

• IR has not confirmed DTArelief;

• Proposed decreased rate 15%

• Certificates

Key issues


21 January 2014

New TransferDuties Act

Proposed to levy transfer Dutyon member’s interest andshares in companies holdingimmovable property.

Key issues


21 January 2014

New skill levy in2014

• Applicable for annualpayroll over N$350,000

• 1,5% levy on total payroll

• Submitted by 20th of nextmonth

Business and investment guide

Follow the link toNamibian Business andInvestment Guide:

http://www.pwc.com/na/en/publications/business-and-investment-guide-for-

namibia.jhtml


21 January 2014

Contacts

PwC Namibia tax practice


21 January 2014

Largest taxpractice inNamibia Team of 50

Specialistteams Cross

Industries

PwC Namibia tax practice


21 January 2014

VAT

Customs& Excise

TransferPricing

Training

PwCNamibia

Tax

CorporateTaxes

EmployeeTaxes

CompanySecretarial

Trusts &Estates

Contacts

Stefan Hugo

Country Tax Leader

Office: +264 61 284 1102

Email: [email protected]

Johan Nel

Associate Director: Corporate Tax

Office: +264 61 284 1122


Photo

Chantell Husselmann

Indirect Tax Director

Office: +264 61 284 1327


Nelson Lucas

Associate Director: Indirect Tax

Office: +264 61 284 1203



21 January 2014

This publication has been prepared for general guidance on matters of interest only, and does not constituteprofessional advice. You should not act upon the information contained in this publication without obtainingspecific professional advice. No representation or warranty (express or implied) is given as to the accuracy orcompleteness of the information contained in this publication, and, to the extent permitted by law, [insert legalname of the PwC firm], its members, employees and agents do not accept or assume any liability, responsibilityor duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on theinformation contained in this publication or for any decision based on it.

© 2012 PricewaterhouseCoopers Inc. All rights reserved. In this document, “PwC” refers toPricewaterhouseCoopers Inc. which is a member firm of PricewaterhouseCoopers International Limited, eachmember firm of which is a separate legal entity.

This publication has been prepared for general guidance on matters of interest only, and does not constituteprofessional advice. You should not act upon the information contained in this publication without obtaining specificprofessional advice. No representation or warranty (express or implied) is given as to the accuracy or completenessof the information contained in this publication, and, to the extent permitted by law, PwC, its members, employeesand agents do not accept or assume any liability, responsibility or duty of care for any consequences of you oranyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decisionbased on it.

© 2013 PricewaterhouseCoopers (“PwC”), the Namibian firm. All rights reserved. In this document, “PwC” refers toPricewaterhouseCoopers in Namibia, which is a member firm of PricewaterhouseCoopers International Limited(PwCIL), each member firm of which is a separate legal entity and does not act as an agent of PwCIL.

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