Value-Added Tax Act 10 of 2000
Value-Added Tax Act 10 of 2000 was brought into force on 27 November 2000, to provide for the imposition and collection of value-added tax and to provide for matters incidental thereto. Subject to this Act, there shall be levied and paid, for the benefit of the State Revenue Fund, a tax (to be known as the value-added tax) on every taxable supply by a registered person; and on every import of goods or import of services, other than an exempt import.
Every registered entity that is liable for the payment of value added tax is required to maintain accounting records in the English language at the place of business in Namibia. Any price charged by a registered person in respect of a taxable supply shall for the purposes of this Act be deemed to include the tax payable on the supply under section 6(1)(a), whether or not the registered person has included tax in such price.
Tax Invoice
A registered person is required to issue a tax invoice which contains particulars such as: the words “tax invoice”, name and address and VAT number, name and address of recipient; description of goods and total amount exclusive of VAT, the VAT charged and total amount inclusive of VAT. (For a full list please see Schedule VI to the VAT Act).
Registration
It is mandatory for a person who carries on a business with an annual taxable turnover above N$500,000 to apply for VAT registration. A person may choose to register for VAT if the annual taxable turnover does not exceed N$500,000 but exceeds N$200,000 but will not be registered if the Commissioner is satisfied that such a person:
1. Has no fixed residence or place of business;
2. Does not keep proper accounting records;
3. Has previously been registered but failed to comply with the Act; and
4. Has failed to comply with the Income Tax Act.
VAT explained
VAT Output – A registered business MUST charge VAT on all its taxable goods and services and this must be reflected accordingly and appropriately in the Tax invoice issued.
VAT Input – VAT on taxable goods and services must be charged by suppliers. This must be reflected accordingly and appropriately in the Tax invoice received.
At the end of the allocated VAT period, every VAT registered entity MUST then net off the Output and the Input VAT to either pay over to the authority or to receive a refund. Every entity acts as a tax collector on behalf of the government. Any price charged by a registered person in respect of a taxable supply shall for the purposes of this Act be deemed to include the tax payable on the supply under section 6(1)(a), whether or not the registered person has included tax in such price.
Example 1. Tax Invoice (Sales) – N$12,538.50 and Tax Invoice (Purchases) – N$11,300.50. In this case the VAT calculation is N$ 1,635.46 (Output VAT) less N$1,473.98 (Input VAT) giving a net payable of N$161.48.
Example 2. Tax Invoice (Sales) – N$114,000.50 and Tax Invoice (Purchases) – N$225,800.50. In this case the VAT calculation is N$14,869.63 (Output VAT) less N$29,452.24 (Input VAT) giving a net refundable of N$ 14,582.61.
VAT Fraud Schemes
Non-registration for VAT
• Non VAT registered businesses charge VAT on their services or goods. The supplier pockets the VAT amount, thereby depriving the government of revenue as well as the receipient the opportunity to claim VAT input.
Undervalued or Non declaration of imports (Imports)
• Reducing the value of imports such that the declared amount is less than the actual cost of the goods.
• Smuggling of goods such that the goods enter the country illegally without official declaration. This is also synonimous with softwares which can be downloaded.
Underreporting (Sales)
• Reporting sales amount less than the actual sales figures. Usually suppliers do not accept electronic payments, they only deal with cash which eliminates the audit trail.
• falsifying sales figures in the VAT summary report to the authorities, thereby declaring less output VAT
Inflated and False Refund Claims
• When taxable goods are purchased locally on exit from Namibia, the purchaser is able to claim the VAT charged on those goods. A most familiar case is the Nuuyomav S(CC 17/2018) [2020] NAHCMD 277(30 June 2020). In which the government claims to have lost N$30,000,000.00.
• Acquire invoices for purchases they have never made in order to claim more refunds from the tax authority, or reduce the amount of VAT payable to the authorities
Domestic Sales Disguised as Exports
• Export sales are exempt from VAT, therefore registered entities sell goods/services in the domestic market and claim to have exported and produce fake export invoices. The real invoices are concealed and are not entered in the accounting records, VAT-inclusive amounts are entered as zero-rated export sales
Fictitious Traders
• Companies register for VAT and make fake purchases and sales. The input VAT is more than the Output VAT, thereby claiming for VAT refund. They create fraudulant VAT returns
Deliberate insolvency
• Entities trade in taxable goods and services. Accomulates VAT payable, declare themselves as insolvent and avoid paying their VAT liabilities in arear.
Smuggling of Goods
• Businesses do not declare their imported goods or services, they sell them in the shadow economy, collect output VAT and fail to pay it
Punishment for VAT Fraud
Any person who fails to pay any tax by the due date for payment shall be liable for the payment of interest at the rate of 20 per cent per annum on the amount of unpaid tax in respect of the period reckoned from the first day after the date on which the payment was due to the date of payment of such unpaid amount. Where the failure was made knowingly or recklessly, to a fine not exceeding N$8 000 or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment; or (ii) in any other case, to a fine not exceeding N$4 000 or to imprisonment for a period not exceeding one year or to both such fine and such imprisonment.
Any person who fails to furnish any return, import declaration or other document required by this Act shall be guilty of an offence and liable on conviction to a fine not exceeding N$4 000 or to imprisonment for a period not exceeding one year or to both such fine and such imprisonment.
Any person who fails to maintain proper records (including accounting records) in accordance with the requirements of this Act shall be guilty of an offence and liable on conviction – (a) where the failure was made knowingly or recklessly, to a fine not exceeding N$8 000 or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment;
Any person who – (a) without sufficient cause fails to produce on demand any records required to be retained in terms of section 48(5) to a taxation officer; or (b) fails to provide a taxation officer with reasonable facilities and assistance as required by section 49(4), shall be guilty of an offence and liable on conviction to a fine not exceeding N$4 000 or to imprisonment for a period not exceeding one year or to both such fine and such imprisonment.
Any person who (a) knowingly uses a false VAT registration number (including the VAT registration number of another person) on a return, notice or other document prescribed or used for the purposes of this Act; (b) uses a VAT import account of another person for a consideration or otherwise to evade the payment of tax in the manner required for non-holders of VAT import accounts; or (c) being a holder of a VAT import account knowingly allows another person for a consideration or otherwise to use his or her account to evade the payment of tax in the manner required for non-holders of VAT import accounts commits an offence and is liable on conviction to a fine not exceeding N$8 000 or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment.
Impact of VAT Fraud
VAT fraud leads to financial deficit on the fiscus, thereby reducung the government’s ability to fund development and social serices programs. Due to financial deficit, the government is then forced to acquire interest bearing loans which at the end costs the country. In general, tax evasion and corruption can have ambiguous effects on economic growth: tax evasion increases the amount of resources accumulated by entrepreneurs, but it also reduces the amount of public services supplied by the government, thus leading to negative consequences for economic growth.
Application for VAT registration should be accompanied by Proof of Banking Details, Fitness Certificate, Founding Statement and Indication of expected turn over for 12 months. Compliance risk may cost you a fortune, it better to comply early. We can assist you with your VAT compliance challenges.
*Honest Madzivadondo CFE, CAMS
honest@ffr-nam.com/0811442323
