TAXATION IN NAMIBIA
CAPRICORN ESTATE AGENCYS’ GUIDELINE TO
PROPERTY ACQUISITION IN
Please consult with your conveyance for detail
Namibia has a highly accurate modern system of registration based on the cornerstone of an accurate diagram and Title Deed relating to all property in Namibia other than unalienated State land. The main purpose of this Deeds Registration system in respect of land is to ensure security of tenure and indisputability of an owner’s title.
The registered owners under "freehold title" hold most properties in Namibia. The purchase of immovable property in Namibia will, in the great majority of cases, comprise obtaining ownership under "freehold title". Section 16 of the Deeds Registration Act is the statutory provision governing the recordal of the change of ownership of property in Namibia.
Ownership of immovable property can only be conveyed by a seller to a purchaser before the Registrar of Deeds, in whose area of jurisdiction the property is situated. Only attorneys who are also conveyances, are allowed to execute a Deed of Transfer in terms of the above provision.
Contractual obligations, which arise between the parties in a sale, are recorded in a written Deed of Sale. This written document must reflect all material terms of the agreement (i.e. what is included and excluded in the offer).
This Agreement must be in writing and signed by the parties or their agents under their written authority. A verbal sale agreement in respect of immovable property is unenforceable in Namibia. Option on pre-emptive right must also be in writing and signed by both parties.
Sales and purchases of property in Namibia are negotiated by Estate Agents acting on behalf of their client. A client can be a seller or a purchaser, as the case may be. Once the sale has been finalised, the seller’s conveyance (i.e. the attorney) is duly instructed to pass transfer of the property to the purchaser. The cost of transfer is born by the purchaser.
The purchaser may, but is not obliged to, nominate a conveyance of his choice to act on his/her behalf and supervise the conveyance of the property. The registration procedure normally takes 2 - 3 months but depends on the circumstances of each case. If all parties are readily available to sign documentation, registration could be done within one month.
An alien who is residing in Namibia illegally is not allowed to purchase property. There are no restrictions for non-Namibian citizens resident abroad, to purchase property.
WHAT ARE THE COSTS FOR THE SELLER AND FOR THE PURCHASER ?
The costs payable by the purchaser in acquiring property is as follows :
The purchaser pays transfer duty to the Namibian Revenue Services in the form of a once off Real Estate tax, which amounts to about 7 – 8%.
If the purchaser is a natural person and registers the property in his own name, the transfer duty (property tax) is calculated on the gross purchase price of the property at the following rate :
on the first N$60 000 - 1% , plus 5% on the amount between N$60 001 - and
N$250 000 - and 8% on N$250 000 - upwards.
These percentages are fixed by the Namibian Revenue Services ;
the purchaser also has to pay transfer costs directly to the seller’s conveyance for passing transfer and attending to the formalities ;
Transfer costs (legal and registration costs of the transfer) amount to approximately 7 - 8% of the gross purchase price. These charges are not a fixed percentage of the price and may vary slightly according to the rates set by the conveyance who does the transfer but the difference is minimal.
When purchasing a property, the purchaser is normally required to pay the purchase price and costs in three stages :
(i) 10% of the gross purchase price is normally payable as a deposit to the Real Estate company on signature of Deed of Sale by both parties. This amount is held by the Real Estate company in their trust account, pending registration of transfer and interest accrued to the purchaser (or the seller if so stated in the Deed of Sale) ;
(ii) the balance of the purchase price is lodged with the conveyance just prior to transfer ;
(iii) the transfer duty and legal costs are payable approximately four weeks prior to the date of transfer so that lodgement of the relevant transfer documents for examination can be effected in the Deeds Registry. The balance of the purchase price plus any occupational rental and share of the current years rates and taxes (levied by the local authority) will be payable against registration of transfer.
The cost payable by the seller is the Estate Agents’ commission. The tariff recommended by the Institute of Estate Agents is set at 7 % of the gross purchase price. These commissions attract Value Added Tax (VAT) of 15 % and the commission rates may vary from region to region.
At present, there is no restriction contained in the exchange control regulations against non-residents introducing capital into Namibia for the purpose of purchasing property.
Should a non-resident decide to disinvest and sell the property at a later stage, the full proceeds of the sale can be freely transferred out of the country and this is possible as long as non-resident status is retained.
Local banks recommend that when introducing funds for this purpose, that they be notified for what purpose the funds are being introduced so as to set up a record of their transfer from outside Namibia. This will facilitate the removal of such funds at a later stage if the party is to disinvest. The non-resident will merely be required to exhibit the Deed of Transfer for the property and the subsequent Deed of Sale for the re-sale of the property. This should be proof of the amount originally introduced from outside Namibia and the amount realised on re-sale. Property or shares purchased by a non-resident must have the share certificates and / or Title Deeds endorsed “non-resident”.
There are several ways in which non-residents may bring money into Namibia to purchase property :
telegraphic transfer from outside Namibia. Upon arrival of the funds at the local bank, a non-resident account will be opened in the client’s name ;
cash may be introduced to the local bank that must be converted into Namibian Dollar and a non-resident account opened in the client’s name. Funds transferred by telegraphic transfer will enjoy a better exchange than a cash conversion, ie. the bank’s commission of 0.3 % for transferred funds versus 1.0 % for cash conversions.
WHAT ARE THE OPTIONS ON HOW TO REGISTER THE PROPERTY ?
After defining the objective for which a property is being acquired, an appropriate vehicle must be chosen to hold such property. This means the name or entity in which the property will be registered.
The following options apply :
An individual purchaser can acquire a property alone or jointly with other individuals. Two or more persons may act as joint purchasers and will be collectively and jointly liable pro-rata for the purchase price, unless specified to the contrary in the contract.
A partnership is not a separate legal entity and does not exist apart from the individuals constituting it. Immovable property can be acquired and registration can be effected in the name of partners carrying on business in a partnership and Namibian Law allows for a maximum of 20 partners.
Partners can only be held jointly and collectively liable as long as the partnership exists. Should the partnership be dissolved or the estate of one of the partners is sequestrated on insolvency, the partners will be held jointly and severally liable in solidium for any debts incurred during the partnership.
A Namibian private company may have 50 shareholders. A sale to an unincorporated private company (or company to be formed) is void. A nominee purchaser for a company in the course of incorporation can enter into an agreement. Once the company is incorporated, the purchase of the property can be ratified. Should a company not be incorporated within a certain period of time (usually stated in the Deed of Sale as a cut-off date) the nominee will normally be obliged to take transfer of the property into his own name.
Within 21 days of establishing a place of business in Namibia an external company, i.e. a company incorporated outside Namibia will be required to file a certified copy of its Memorandum of Incorporation with the Registrar of Companies. In terms of Section 324 of the Companies Act, the external company thereafter, has the same power as a Namibian company to own immovable property in Namibia.
1-10 Natural persons may form a Close Corporation, there are no shares in a CC and each member’s interest is expressed as a percentage.
Inter Vivos Trust
In Namibia, a duly formed inter vivos trust created by the founder appointing trustees to hold the assets of the trust on behalf of beneficiaries (once registered with the Master of the Supreme Court) can acquire immovable property subject to the provisions contained in the Trust Deed.
The effect of a contract in Namibian law is not dependent on the name given to the contract. Therefore, depending on the manner in which the contract is drawn, a so-called joint venture may well be an ordinary partnership. In most instances where parties co-operate in a commercial association, they want to avoid the risk of problems on the insolvency of either partner and want a commercial association other than a partnership.
Generally, a joint venture will be conducted through the means of a limited liability company and due consideration will have to be given to the Memorandum and Articles of Association to ensure that they are consistent with the joint venture agreement.
When entering into a Deed of Sale contract, the purchaser might not have decided by what vehicle the property is to be acquired. In this event, the purchaser can enter into the Deed of Sale personally and incorporate a provision whereby he has the right to nominate a third-party as purchaser within a specified period, usually about 1 month. Should such nomination not be made and accepted by the third-party in the prescribed time, then the purchaser is obliged to acquire the property in his own name.
Purchase of Shares in a Company or of Members’ Interest in a CC
If the property to be acquired is in fact already owned by a company or a Close Corporation and such property comprises the sole asset in the company or Close Corporation, the purchaser, if that is the form in which he would like to own the property, may acquire the total shareholding and loan accounts in the company. The purchaser may also buy total membership in the Close Corporation, instead of buying the property out of the company or Close Corporation, thus becoming the owner of the property through this medium. Should this be possible, transfer duty is not payable and the costs incurred are minimal.
Purchase of Property in Namibia through an Offshore Trust
An offshore trust can hold the property via shares in a company registered in Namibia. This company can have the property as its only asset. The asset/s in the trust will not form part of the Estate of the person who transferred them into the trust. This provides the security of knowing that they will be held for the benefit of the person’s heirs independently of any legal considerations in Namibia.
All information regarding the financial aspects of property purchase is based on
current rules and regulations and is subject to change at any time.
Please consult with the Forex Department at your local bank for details.
Exchange Control in Respect of the Purchase of Property in Namibia by Contract Workers
Nationals of other countries who are temporarily resident in Namibia on secondment to a local entity or who are recruited under a definite contract and for a specific period are regarded as residents of Namibia for the duration of their contract or secondment. Such persons must however, declare the following to the Namibian Reserve Bank :
whether they previously resided in Namibia and if so, furnish the name of the authorised dealer (bank) who dealt with their emigration formalities ;
whether they own foreign assets and if so, give a written declaration to the effect that they will not place such foreign assets at the disposal of any third-party normally resident in Namibia.
The foreign national’s local bankers will forward these statements together with a letter from the employer, giving particulars of earnings and confirming employment on contract or secondment to the Namibian Reserve Bank.
On completion of these formalities, the foreign national may then enjoy all facilities available to residents of Namibia, which includes a mortgage/bond for the purchase of a residential property. Such mortgage/bond is not restricted and depending on the standing of the client can be 100% of the purchase price of the property. The granting of any borrowing facility is subject to the approval of the lending manager in the branch where the foreign national holds his/her account.
Exchange Control in Respect of the Purchase of Residential Property in Namibia by New Immigrants
Immigrants to Namibia are required on arrival, to complete a form on arrival, which incorporates a declaration of foreign assets and liabilities. This document together with a copy of the immigrant’s permanent residence permit is forwarded to the Exchange Control Department of the Namibian Reserve Bank.
Within the first five years of residence, the immigrant is permitted to dispose of or otherwise invest his/her foreign assets including foreign cash funds held by him/her on the date of his/her arrival in Namibia without interference from the Namibian Reserve Bank.
Immigrants may purchase residential property utilising a bond facility without restriction and depending on the standing of the client, such bond could be 100% of the purchase price of the property. The granting of the bond facility is subject to the approval of the lending manager in the branch where the client's account is held.
Should an immigrant decide to leave Namibia permanently within five years he/she may, under advice to the Namibian Reserve Bank, re-transfer abroad all assets introduced during the five year period provided that such transfers are not financed out of local borrowing facilities. Should the immigrant on sale of the property, have funds in excess of the sum introduced into Namibia, special request would have to be submitted to the Namibian Reserve Bank for permission to export these funds.
Exchange Control in Respect of the Purchase of Residential Property in Namibia by Non-Residents
A Non-resident of Namibia is a person, i.e. a natural person or legal entity, whose normal place of residence, domicile or registration is outside the common monetary area of Namibia.
Non-residents may purchase property in Namibia but they may not be granted any financial assistance, i.e. a bank loan for the full purchase price.
Non-residents are allowed to apply to the Namibian Reserve Bank, via his local bank, for a bank loan facility not exceeding 100% of his/her “borrowing base”.
The “borrowing base” of a non-resident individual, is the sum introduced into Namibia to fund the property purchase, i.e. purchase of property at N$ 2 million. The non-resident introduces an amount from outside Namibia of N$ 1 million and may apply to borrow locally the amount of R1 million.
On receipt of the Namibia Reserve Bank approval for the non-resident to utilise bond facilities it is necessary for the non-resident client to open a non-resident account in Namibian to facilitate the bond repayments. This account would have to be funded from abroad or from rentals received on the property purchased subject to the bank/branch holding the account being provided with a copy of the Rental Agreement.
Non-residents purchasing residential property without utilising bond facilities are advised to ensure that the Title Deed is endorsed “non-resident” to ensure that when the property is sold there will be no delay in transfer of the sale proceeds abroad.
Rental income for non-residents is transferable provided the authorities are supplied with a copy of the Rental Agreement and a letter from an independent estate agent confirming the rental as market related.
The following serves as a guideline only.
CAPRICORN ESTATE AGENCY will not be liable for the correctness
of the information given to us by the relevant party.
Please consult with your nearest Namibian Consulate for details.
Basic Principles and Policies of Namibian Immigration
The present Namibian immigration policy places emphasis on broadening the economic base of Namibia by concentrating on recruiting those immigrants who are in a position to render meaningful contribution in this regard.
The Namibian immigration policy is embodied in an Immigration Act, which prescribes certain requirements :
the applicant must be of good character ;
he/she must be a desirable inhabitant ;
he/she must not be likely to be harmful to the welfare of Namibia, nor follow an occupation in which there are already a sufficient number of persons available to meet the requirements of the country.
Persons on valid work or business permits may apply for immigration (resident status) locally.
Categories of Immigration
Workers who fall into the age group of between 18-51 must be in possession of firm offers of employment commensurate with their qualifications and experience, and if professionally qualified, will have to register with the appropriate Namibian body.
It will be expected of employers to motivate why Namibian citizens cannot fill the positions offered to prospective immigrants.
Family Reunion Scheme
Persons wishing to immigrate under the Family Reunion Scheme may apply for permanent residence provided the family members who are Namibian citizens or permanent residents of Namibia, undertake to assist the applicant and his family financially for the duration of stay in Namibia or until the breadwinner is economically active, whichever is sooner.
Spouses and Children
Applies to cases where the spouse is a Namibian citizen or a permanent resident in Namibia and who can submit proof that he/she is legally married, has sufficient means to maintain his/her spouse and if applicable, any dependent children in Namibia.
Person/s who are Sponsored
The law provides that a destitute, aged or infirm member of the family may be sponsored by a person/s permanently and lawfully resident in Namibia, provided such person is financially able to support such a member of the family.
Retired persons must submit documentary proof of their financial assets readily transferable to Namibia. The extent of the amount thus, transferable and/or the assurance of a continued income of sufficient extent abroad are among factors taken into account.
Persons who are engaged to a Namibian citizen or permanent resident can be divided into two groups, i.e. those who are considered to be acceptable in their own right and those who are not acceptable in their own right and whose applications may be considered by the Immigrants Selection Board on submission of a marriage certificate.
Financially Independent Persons
Financially independent persons who intend immigrating to (residing permanently in) Namibia and who apply in the category, financially independent, i.e. investors, will henceforth be required to :
transfer a guideline amount of not less than N$ 1 500 000 to Namibia of which an amount of US $ 100 000 must be invested in the Namibian economy for a period of three years, either as a deposit with a financial institution or by any other means such as the acquisition of immovable property. After three years the applicant must show proof that this requirement has been complied with failing which, their immigration permits may be withdrawn ;
refrain from engaging in employment, or establishing his/her own businesses without the approval of the Department of Home Affairs ;
notify the Department of Home Affairs of any change of address during the three-year period.
Persons who wish to establish own businesses in Namibia will, in addition to providing sufficient funds for their maintenance and that of their families, be required to :
transfer such minimum amounts as may be determined by the Immigrants Selection Board ;
submit to the Department of Home Affairs the following documentation after twelve months of establishment of the businesses, i.e. :
i) audited Financial Statements in order for the viability of the business to be assessed ;
ii) documentary evidence that since the establishment of the business, at least two Namibian citizens or permanent residents excluding family members, have been appointed and are still in service ;
iii) documentary evidence that the amounts as determined by the Department of Home Affairs, have been utilised for the intended purpose.
Own Business in Partnership or Co-operation
Those who intend to enter into business with one or more persons or to continue with an established business (such as a proprietary limited, limited company, close corporations or partnerships) must, after twelve months from their entry into such ventures, submit evidence that their involvement resulted in a substantial contribution towards the Namibian economy or the full time employment of at least two Namibian citizens or permanent residents of Namibia, excluding family members.
Persons who Enquire about Immigration
Persons enquiring about immigration (except spouses and children and persons who are sponsored) are requested to complete a Preliminary Immigration Questionnaire, prior to being invited to apply for permanent residence in the Namibia.
Persons who intend to start a feasibility study with regard to the new business prospective immigrants of eighteen years or older, will be subjected to a personal interview conducted by an official of the Department of Home Affairs.
It is important to note that in the case of married persons, applications are considered on the basis of a family unit.
TAXATION IN NAMIBIA
The following serves as a guideline only.
CAPRICORN ESTATE AGENCY will not be liable for the correctness
of the information given to us by the relevant party.
Please consult an international tax consultant in Namibia for details.
At present, the Namibian tax system imposes tax on the basis of source rather than residence. Income is subject to tax if it is from a source within or deemed to be within Namibia, i.e. if the originating cause is in Namibia. The place of incorporation, domicile or residence of a foreign investor is generally irrelevant. However, this system is currently being reviewed by Parliament. There is no capital gains tax at present.
The tax consequences for a foreign investor of trading with or within Namibia will be affected, not only by the domestic tax systems in Namibia and the foreign country, but also by the provisions of any double taxation agreement (DTA) concluded between Namibia and the investor’s home country.
A double taxation agreement is an agreement between two countries for the avoidance of double taxation in respect of income accruing to a resident of one country from the other country.
Significant taxes to be considered by the foreign investor include, amongst others :
invoice based Valued Added Tax (VAT) levied at 15% in respect of the supply of goods and services in the course of furtherance of an enterprise ;
in South Africa, transfer duty of 10% on the transfer of immovable property to a company and a maximum of 8% on the transfer to an individual, is payable when the transaction is not subject to Valued Added Tax (VAT) ; in Namibia no additional transfer cost is payable when a property is registered in a Close Corporation or Company.
No donations tax at a rate is payable on the value of property donated by Namibian private companies and individuals ;
individual income tax levied at progressive rates, with a maximum marginal rate of 36%;
no estate duty is payable on a deceased estate.
Investment income derived from an actual source within Namibia or a source deemed to be Namibian, is usually subject to tax but dividends received by resident individuals both from Namibian and foreign companies are exempt from tax in Namibia. There is no withholding tax on dividends paid to non-residents. The actual source of interest is located where the credit is made available to the borrower. The first N$ 2000 of otherwise taxable interest is exempt.
Namibian source interest is presently exempt from tax, if it is earned by an individual ordinarily resident outside Namibia who does not carry on a business there and who has been physically absent from Namibia for at least 183 days during the year of assessment.
Certain foreign bank and building society interest earned by a person ordinarily resident in Namibia is deemed to be from a Namibian source and is therefore, taxable.
Royalties paid from Namibia to individuals not ordinarily resident in Namibia and not carrying on business in Namibia are subject to withholding tax of 12%. A double tax treaty may reduce this rate.
Most DTA agreements provide that taxable income from letting property may be subject to tax in the country where the income originated, and not in the country of residence as well.
Namibia does not have a system of general social security providing benefits, but some limited benefits are provided for.
The government operates a pension fund for civil servants and provides limited social pensions. Private pension funds, regulated by statute, are operated by employers and administered by various methods, often by insurance companies.
Namibia does not have a national medical insurance system and private medical aid programmes cover most types of medical expenses, including payments for medical/dental services, hospital/ nursing home fees and prescribed medicines.
FOR FURTHER INFORMATION PLEASE CONTACT :
Capricorn Estate Agency
P O Box 104
Tel : 264 – 64 - 40 5300
Fax : 264 – 64 – 40 5318