Dividends paid by Namibian companies to foreigners are subject to a 10% tax known as Non-resident Shareholders Tax (“NRST”).
Many are aware that dividends paid by Namibian companies to foreigners are subject to a 10% tax known as Non-resident Shareholders Tax (“NRST”).
As a general rule, dividends paid by a Namibian company to Namibian residents however would not be subject to NRST, as the Namibian company would not be recognised as a non-resident. There is a significant exception to this general rule, where the ultimate shareholding in the Namibian company is a non-resident. The shareholding could trigger an inclusion of the Namibian company into the scope of NRST. NRST would be levied on dividends paid to a Namibian company where more than 50% of the issued share capital or equity share capital in that company is owned by a company not managed or controlled in Namibia. The NRST levied in this instance will be a final tax with no further NRST levied on the declaration by the Namibian company of dividends to its ultimate non-resident shareholder.
Notwithstanding this exception, the Namibian Revenue Authority released a practice note in 2003 which clarified that NRST would still not be imposed on such foreign-owned companies where more than 50% of the shareholding is held by residents in countries with which Namibia has concluded treaties for the avoidance of double taxation. In these cases, NRST will only be levied when the foreign-owned Namibian company declares a dividend to its non-resident shareholder.
Namibia has concluded treaties for the avoidance of double taxation with the Botswana, France, Germany, India, Malaysia, Mauritius, Romania, Russian federation, South Africa, Sweden and the United Kingdom which may reduce the 10% rate provided that the conditions within the respective agreements are met. Canada is not yet ratified and as such is not in force.
The following illustration summarises the above rules.
Please note that the contents of this article do not address the proposed amendment that was tabled in the 2018 Budget Speech which seeks to tax Namibian companies on dividends declared to them as the said proposal is not related to the NRST provisions.
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