Worldwide transfer pricing reference guide 2014

Namibia
Taxing authority and tax law
Taxing authority: Directorate Inland Revenue (Inland Revenue).
Tax law: Section 95A of the Income Tax Act 24 of 1981 (the Act) contains the main legislative provisions concerning transfer pricing.
Section 95A authorizes Inland Revenue to adjust the consideration for goods or services to an arm’s length price for the purposes of
calculating the Namibian taxable income of a person.
Relevant regulations and rulings
There are no specific regulations or rulings; however, guidance on the application of section 95A is currently contained in Practice Note 2
of 2006 dated 5 September 2006.
OECD Guidelines treatment
Although Namibia is not a member of the OECD, Inland Revenue accepts the OECD Guidelines and has largely based its practice on them.
Practice Note 2 provides as follows:
“This Practice Note is based on and acknowledges the principles of the OECD Guidelines. Nothing in this Practice Note is intended to be
contradictory to the OECD Guidelines and in cases where there is conflict, the provisions of the OECD Guidelines will prevail in resolving
any dispute.
“Any amendments made to the OECD Guidelines will be deemed to be incorporated into this Practice Note.”
Inland Revenue also accepts the principle methods referred to in the OECD Guidelines.
Priorities/pricing methods
Inland Revenue accepts the methods prescribed by the OECD, i.e., CUP, Resale Price, Cost Plus, TNMM and Profit Split. According to
Practice Note 2, “the suitability and reliability of a method will depend on the facts and circumstances of each case. The most reliable
method will be the one that requires fewer and more reliable adjustments.”
Transfer pricing penalties
No specific transfer pricing penalties are imposed in the Act. This being said taxpayers face the following penalties:
• Additional tax of up to 100% of the provisional tax amount short paid
• 200% of the additional tax resulting from an adjustment (in the event of default, omission, incorrect disclosure or misrepresentation)
• Interest of 20% per year
Penalty relief
Where taxpayers have made conscientious efforts to establish transfer prices that comply with the arm’s length principle, and have
prepared documentation to evidence such compliance, Inland Revenue will likely take the view that the taxpayer’s transfer pricing
practices represent a lower tax risk. Such evidence may provide some mitigation against the 200% additional tax.
Documentation requirements
There is currently no statutory requirement to prepare transfer pricing documentation. Furthermore the income tax return does not
require confirmation that cross-border related party transactions are entered into at arm’s length. Practice Note 2 of 2006, however,
encourages taxpayers to prepare documentation should Inland Revenue request such information.
Documentation deadlines
There is currently no obligation to submit transfer pricing documentation.
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