Law to remove tax incentives for manufacturers passed

An amendment to section 5A of the Income Tax Act, adopted on 22 June 2020, scrapped benefits granted to manufacturers, including a reduced tax rate of 18%, as well as other tax incentives. Manufacturers were also given a 10-year capital allowance claim for buildings instead of 20 years. They were additionally granted a 125% tax deduction for expenses such as salaries and training costs of employees.

The amendment to the Income Tax Act also includes the repeal of several sections in the Export Processing Zone Act, which exempted export processing zone companies and management companies from paying value added tax, income tax, as well as customs and excise duties.

The previous special income tax incentives granted to registered manufacturers shall continue to apply until the end of the tax year 2020. In his budget speech, the minister of finance had said that the phasing out of these base-eroding tax exemptions will be replaced by the introduction of special economic zones, while incentives for manufacturers are to carry grandfathering provisions.

• Type:

  • Promotion and facilitation (Investment incentives)

• Industry:

  • Manufacturing

• Sources:

  • Government Gazette, Promulgation of Income Tax Amendment Act, 2020 (Act No. 2 of 2020), of the Parliament, https://www.lac.org.na/laws/2020/7249.pdf, 22 Jun 2020
  • ENSight, Law to remove tax incentives for manufacturers passed , https://www.namibian.com.na/202461/archive-read/Law-to-remove-tax-incentives-for-manufacturers-passed, 17 Jun 2020