NAMIBIA | Tax framework for infrastructure projects

Orientation in Namibian tax law

Austrian construction and plant engineering companies that execute projects in Namibia should plan their structures at an early stage. Namibia applies the source principle. This means that income from services performed in Namibia is subject to Namibian tax, regardless of where the recipient of the income is resident. There is currently no double tax treaty between Namibia and Austria. On the Namibian side, only domestic law applies, in particular the Income Tax Act 1981 and the Companies Act 28 of 2004.

Namibian corporate tax on project profits

Namibia levies corporate income tax on business profits, referred to in the legislation as “normal tax”. For non‑mining companies, the tax rate has been 30 percent since 1 January 2025. This rate applies equally to a Namibian subsidiary and to a branch of a foreign company operating in Namibia, which is referred to in Namibian company law as an “external company”. All income from construction and installation work carried out in Namibia, as well as related services, is treated as Namibia‑source income and is taxable there. 

The most recent budget proposal provides for a reduction of the corporate tax rate to 28 percent at a later stage, as well as the introduction of a new general dividend tax of 10 percent with effect from 1 January 2026, in each case subject to the enactment of the necessary legislation.

Withholding taxes on cross‑border payments

Namibia levies withholding tax on certain payments to foreign recipients. These deductions generally have final tax character in Namibia. The payer must withhold the tax and remit it to the authorities by the 20th of the following month. The main cases that are relevant in practice are:

Management, consulting and technical services

A 10 percent withholding tax applies to any “management or consultancy fee”. The term covers administrative, managerial, technical and advisory support, regardless of whether the services are provided as an independent profession.

Directors’ fees and entertainment fees

A 25 percent withholding tax applies to directors’ fees, as well as to remuneration paid to entertainers or athletes for performances in Namibia.

Royalties and know‑how 

A 10 percent withholding tax applies to payments for the use of intellectual property rights and to payments for the provision of scientific, technical, industrial or commercial knowledge for use in Namibia. Such amounts are treated as Namibia‑source income.

Interest 

A 10 percent withholding tax applies to Namibia‑source interest paid to foreign lenders. Certain financial institutions are specifically obliged to withhold and remit this tax. If the payer fails to withhold and remit the tax, it becomes personally liable for the unpaid tax, plus penalties and interest. As there is no double tax treaty with Austria, these withholding taxes cannot be avoided by treaty relief.

Note on contract drafting

Considerations for construction or supply are not automatically subject to withholding tax. However, if the contract includes components for management, engineering, supervision or other advisory services, the 10 percent withholding tax on “management or consultancy fees” will usually apply. Careful delineation of services and prices is therefore essential.

Practical tips:

• Include clear tax clauses in your contracts that state that prices are exclusive of withholding taxes.
• Take care with the wording used in invoices to make classification under the withholding tax rules as clear as possible.
• For services subject to withholding tax, review to what extent the Namibian tax can be credited or otherwise relieved in Austria.

Branch versus subsidiary

Namibian subsidiary

A local company is subject to corporate income tax at 30 percent on its profits. Distributions to foreign shareholders are subject to Non‑Resident Shareholders’ Tax (NRST). The rate is 10 percent if the foreign shareholder is a company that holds at least 25 percent of the Namibian company, otherwise 20 percent. The company must withhold and remit this tax. Economically, a 10 percent NRST on distributions corresponds to an overall tax burden of around 37 percent of the original pre‑tax profit if the entire after‑tax profit is distributed.

Branch (external company)

If the Austrian company executes the works without interposing a local company, the activity is treated as a branch and must be registered as an “external company” once a business presence in Namibia is established. Profits attributable to the branch are subject to 30 percent normal tax. Namibia does not levy a separate branch profits tax, and transfers of profits from the branch to the head office are not subject to additional tax.

When choosing between a subsidiary and a branch, in addition to the Namibian tax consequences, aspects such as tender requirements, contractual practice, liability considerations and the Austrian tax rules must also be taken into account.

Austrian tax treatment of Namibian income

Corporations resident in Austria are subject to tax on their worldwide income and are liable to Austrian corporate income tax at a rate of 23 percent.

Dividends from Namibia

Dividends paid to an Austrian corporation are generally tax exempt under section 10 of the Austrian Corporation Tax Act (KStG). Section 10a KStG provides for certain exceptions, but these should not usually apply where the distributing Namibian company carries on an active construction business and is taxed at 30 percent in Namibia. Because dividends from Namibia are tax exempt in Austria, the Namibian NRST withheld cannot be credited against Austrian tax and becomes a pure cost. If, in an exceptional case, a dividend is taxable in Austria, a foreign tax credit is in principle available only up to the amount of the Austrian tax attributable to that dividend.

Branch income

In the absence of a tax treaty, there is no automatic exemption for foreign permanent establishment income. However, the ordinance issued under section 48 of the Austrian Federal Fiscal Code (BAO) allows for unilateral relief, either by general ordinance or in individual cases on application. In practice, where foreign taxation is documented, the Austrian tax authorities generally grant relief in the assessment procedure, either by exemption or by credit. Since Namibia levies normal tax at 30 percent, an exemption of Namibian profits in Austria will be possible in many cases, in particular where the income derives from construction or installation activities or from a Namibian permanent establishment. For these purposes, the Namibian profit must be recalculated based on Austrian tax accounting rules. As an alternative, the  credit method may be applied. 

Withholding tax

Where Namibian withholding taxes are levied, a credit in Austria will generally be available under the section 48 BAO ordinance. However, because Namibian withholding tax is applied to gross income, whereas Austria taxes net income, full crediting of the Namibian withholding tax will often not be possible.

Structuring considerations

To benefit from the protection of a double tax treaty for projects in Namibia, it may be worth considering holding structures through foreign subsidiaries in states that have a tax treaty with Namibia. Namibia’s treaty network is very limited. In Europe, only Germany, France, the United Kingdom, Sweden and Romania currently have double tax treaties with Namibia.

Practical recommendations for construction and plant engineering projects in Namibia

If you are planning multi‑year EPC or plant construction projects, a Namibian subsidiary is often the most robust solution. It provides clear single‑level taxation in Namibia and will frequently meet the expectations and requirements of clients and authorities.

From a tax perspective, the challenge is to ensure that services relating to the Namibian project are properly mapped to and invoiced through the Namibian company, even though there is usually a single overall contract with the Austrian head office. Otherwise, there is a risk that, in addition to the Namibian company, the Austrian company itself becomes taxable in Namibia. This risk arises in particular in connection with engineering, planning and other technical services performed in Austria for the Namibian project, or where the Austrian company deploys its own personnel on the ground in Namibia.

A branch structure avoids dividend withholding tax in Namibia, but Austrian relief from double taxation then depends on the correct application of the domestic procedures under the section 48 BAO ordinance. Under both models, registration for tax purposes in Namibia, correct operation of withholding tax and, where relevant, registration and compliance under Namibian VAT rules must be ensured. Deadlines, in particular the payment deadline on the 20th of the following month for withholding taxes, should be integrated into internal payment and compliance workflows.

It is also important to monitor legislative developments. The 30 percent corporate tax rate is currently in force. A further reduction of the rate and the introduction of a general dividend tax have been announced and will require implementation in the form of legislation.