Trade between Namibia and South Africa Navigating Indirect Taxes

Recently, import tariffs have become quite a topical issue, with US president, Donald Trump, increasing tariffs quite substantially for many countries. These tariffs are, in the main, customs tariffs. It is now a good time, more than ever, to consider indirect tax implications for importing goods between the two Southern African neighbours.

Indirect taxes mainly consist of customs duties and valueadded tax (VAT). From a customs perspective, both South Africa and Namibia are members of the Southern African Customs Union (SACU), established in 1910, making it the world’s oldest customs union, with a common external tariff and shared customs revenues that allow for less strenuous customs clearance procedures between its members.

Namibia and South Africa are also members of the Southern African Development Community (SADC), which allows for the importation of goods between the two countries to be free from customs duty. Customs duty for Namibian and South African businesses is, therefore, generally not an additional cost. The same, however, cannot be said for VAT.

Both countries’ VAT legislation operates a regime where the importation of goods is subject to VAT at 15% in both Namibia and South Africa. VAT is payable by the importer of the goods and depends on the customs value thereof as determined by customs legislation. Therefore, it is very important for businesses to understand the customs valuation principles set out in the Namibian and South African customs legislation. For goods imported from South Africa to Namibia, the value of imported goods for VAT purposes is the greater of the free-on-board (FOB) value plus 10% of that value or the open market value of the goods. For importation from Namibia to South Africa, the VAT is calculated based only on the customs value of the goods (there is no 10% “step-up”).

The goods’ sale terms are also critical in establishing who the importer of record is, as the importer is liable for VAT in the relevant country of importation. The Incoterms are therefore essential, as, for example, a sale on the FOB basis would effectively make the buyer the importer. In contrast, a delivery-duty-paid (DDP) basis would make the seller the importer. Furthermore, it is important to consider which party is responsible for the exportation and the mode of transport to determine whether the seller may zero-rate the supply of the goods for VAT purposes. Whether the supply constitutes a direct or an indirect export has a significant impact on whether the seller has to levy VAT on the sale of the goods. In addition to the importation and exportation considerations, the two countries’ VAT legislation provides for the importation of goods under certain circumstances to be exempt from VAT.

Businesses are strongly encouraged to obtain professional tax advice from reputable advisors to ensure that they navigate the indirect tax implications of trade between South Africa and Namibia effectively and avoid unnecessary additional costs.

Leonard Willemse

Director, Indirect Tax