1% corporate tax reduction imminent
Corporate Namibia could be set for a relief tomorrow when the Minister of Finance, Calle Schlettwein, announces the national budget in the form of a 1% corporate tax reduction, which was confirmed by the Commissioner of Inland Revenue, Justus Mafongwe.
“The reduction will see corporates paying 32% as we promised. In a way the reduction will have a direct benefit on people because companies will be enabled to make further investments,” said Mafongwe.
Corporate Tax Rate is currently averaging 33.50% and has been since 2011.
The Corporate Tax Rate, which is reported by his department, Mafongwe said, is based on the net income companies obtained while exercising their business activity, normally during one business year.
“The benchmark we use refers to the highest rate for Corporate Income. As you already know revenues from the Corporate Tax Rate are an important source of income for the government of Namibia,” he said.
The Ministry of Finance introduced a withholding tax on interest, which is levied on any interest earned or accrued to any person (other than a Namibian company) from a Namibian banking institution and/or a unit trust.
The 10% tax will still be deducted from interest earned by any person on bank accounts and applicable unit trust investments.
“For withholding tax on investment, banks will automatically withhold 10 percent of interest earned and this is for individuals only as companies will still be expected to declare,” he said.
Quizzed about the criticism of this posing too much of an administrative burden for banks and other service providers, Mafongwe insisted that tax is still better when collected at source.
“I don’t think it is a burden because it is already taking place and banks are happy doing their part. Previously we allowed individuals to declare it but that did network out so well,” said Mafongwe
Since former Minister of Finance, Saara Kugoongelwa-Amadhila, announced a reduction in the Corporate Tax Rate over three years ahead 2013/2014 financial year, Mafongwe said the ministry has been working to see it through, which means the Corporate Tax Rate will reach its all-time low of 32%.