VAT – VALUE ADDED TAX
An introduction
VAT Act 10 of 2000
OUTCOMES
Upon the successful completion of this Study Unit you should be able to:
• Calculate the VAT payable or refundable for a relevant tax period;
• List the registration requirements and apply these requirements to a given
set of facts;
• Select the most important definitions in the VAT Act and motivate the
choice/s;
• Explain what accounting bases may be used and explain which bases to
apply for;
• Prepare journal entries to record VAT transactions; and
• Prepare and motivate correcting journal entries to rectify accounting
records.
VAT introduction
• VAT is very rule driven. The rules mostly make sense and the
principles must be practised in.
• A tax on consumption (spending)
• Applied on the value added to goods and Services
• A multi-stage tax - Collected at each stage of production,
importation and distribution chain
Exam Type of questions:
– VAT payable / receivable calculation
– Journals (entry)
– Journals (corrections)
– Discussion
VAT introduction
• Make sure you apply the rules and don’t just do a mind dump.
• You must convince the examiner that you know and understand
the rules,
– E.g.: Indicate if a supply is zero rate / exempt / non supply of
goods or services
• Make sure that if something doesn’t have VAT you point that
out and give a reason
– Petrol e.g.: say it’s a zero rate supply, and thus N$ Zero
VAT,
VAT Overview
VALUE ADDED TAX
What is it? OUTPUT VAT INPUT VAT
Zero rated Denied
supplies input
Exempt supplies
Deemed supplies
Introduction
• Levied ito Value-Added Tax Act 10 of 2000
• At what rate is VAT levied?
• VAT is an Indirect tax
What does
this mean?
User acquiring
Supplier/Vendor NamRA
goods/services
• Prices must include VAT, unless specifically broken down
into value and VAT
VAT in perspective
• Separate VAT Act
• VAT levied on taxable supplies (TS) by a vendor
– TS = at standard rate (15%) or zero-rated (0%)
• Indirect tax on transactions (not directly levied by Receiver)
– Levied on consumption of goods and services in Namibia
• Different terms include and exclude VAT:
– Value of supply = amount excluding VAT
– Consideration = amount including VAT (being, Value + VAT)
– Open market value = should include VAT
7
VAT
Output tax levied Input tax claimed on Imported
on TS made by vendor supplies made to vendor goods & services
(Definition s 1)
Eg. on purchase of trading Additional cost to
Eg. on sale of trading stock from suppliers person importing
stock to clients to NAM
Output tax levied by
supplier & valid invoice?
Even if not a VAT
vendor!
VAT return submitted to IRS:
Output tax (X)
VAT levied on imported services (X)
Input tax X
Output tax adjsutments (X)
Input tax adjustments X .
VAT (payable) / receivable (X)
8
Calculation of VAT
• D
Output tax
Input tax
Tax payable/refundable
Tax periods (s 27)
Tax period
Category A: 2 month periods ending uneven months (Jan, March, May etc.)
Category B: 2 month periods ending even months (Feb, April, June etc.)
Category C: Two-, four-, six- or twelve month
For sole farming activities; choice is once-off at registration
Category D: Six month periods, ending Feb/Aug
Voluntary registrations
Category will be given
Definitions
Definition – when will a transaction
attract VAT?
There should be:
1• a supply
2• of goods or services
3• by a registered person (vendor)
4• in the commencement, course or
termination of a taxable activity
1 Supply
To provide or to make available (dictionary)
Defined in s1
• includes a sale, rental agreement, an instalment
credit agreement….
• 2 persons involved (supplier and recipient)
• includes supplies for consideration other than money
2 Goods or services
"Goods" are defined as:
• corporeal movable things Things that can be
touched
• fixed property
• any real right in the above (e.g. usufruct)
• electricity
Excl. Money, revenue stamps, certain rights
2 Goods or services
"Services" are defined as: Anything done
or to be done
• granting, cession or surrender of any right or
the making available of any facility or
advantage
• if not a supply of goods, then a service (incl.
trademarks, goodwill, patents and know-how)
3 By a vendor
Person registered/required to be registered under the VAT act
Who is required to
Includes: register in terms of
• Company, CC the VAT act?
• Body of persons
(partnership)
• Deceased/insolvent
estate etc.
3 By a vendor(cont.)
Registration as a vendor: Compulsory registration:
Excl. VAT
• if taxable supplies > N$ 500,000 at the end of 12 months
• if it is anticipated that taxable supplies for the next 12 months
will be > N$ 500,000 any consecutive period of
12 months
Example
Miss Ilongo carries on three different enterprises that only
make taxable supplies. All three enterprises are carried on in
her own name.
• Enterprise 1: Turnover of N$ 360 000 for 12 months
(excluding VAT)
• Enterprise 2: Turnover of N$ 320 000 for 12 months
(excluding VAT)
• Enterprise 3: Turnover of N$ 340 000 for 12 months
(excluding VAT)
Determine whether Miss Ilongo is obliged to register for
VAT purposes if the above information applies to the 12
months ending 31 December 2023.
Solution
• Total turnover = N$ 1 020 000
• This > N$ 500 000
• Miss Ilongo has to register as a VAT vendor
3 By a vendor (cont.)
Registration as a vendor: Voluntary registration:
• Taxable supplies > N$ 200 000 for 12 month period
• Taxable supplies expected to be > N$ 200 000 in the next
12 months
3 By a vendor (cont.)
Registration Pre-requisites:
1) Fixed place of abode
2) Keep proper accounting records
3) Has not previously failed duties under VAT
4) Has not failed to comply with other tax laws
In the commencement, course or
4 termination of a taxable activity
Definition of ‘taxable activity’
• Any activity carried on continuously or regularly in Namibia
in which goods or services are supplies for a consideration,
whether or not for profit.
• Associations, clubs and charities
• Partnerships and other unincorporated bodies
• Municipalities or other local authorities
In the commencement, course or
4 termination of a taxable activity
Specifically excluded from the definition of ‘taxable activity’
• Excludes
➢ Private or recreational hobbies
➢ Branch permanently located outside of Namibia, unless
‘Independent’ branch – own accounting system and
separately identifiable
➢ Granting of Fringe Benefits
➢ Subsidies, grants and bursaries
➢ Supply of services by an employee to his employer
➢ Exempt supplies
➢ Registration of or issuing of licence by registering
authority
➢ Long-term residential accommodation in a dwelling
3 VAT Admin
Administrative Documents Required:
1) Proof of banking details
2) Fitness certificate
3) Founding statement
4) Indication of expected turnover for 12 months
VAT admin
Accounting
basis
2 Accounting bases that may be applied by
a vendor to account for VAT
• Invoice basis Determines time
• Payment basis of supply
Invoice basis
General rule to account for VAT, when:
Earlier of:
• invoice is issued OR
• any payment is received (even part-payment)
Example
A vendor registered on the invoice basis supplied the
following goods:
(a) On 2 February goods are delivered at one of the
clients’ premises and the invoice for the goods was issued
on the same date. The payment for the goods was received
on 31 March.
(b) On 29 April a client paid N$ 100 000 for goods
delivered on the same date. The invoice was issued on 14
May.
You are required to determine the time of the above
supplies for VAT purposes.
Solution
(a) Earlier of:
• invoice is issued (2 February) OR
• any payment is received (31 March)
= 2 February
(b) Earlier of:
• invoice is issued (14 May) OR
• any payment is received (29 April)
= 29 April
Non-Supplies
• Money
• Cash dividends
• Payment of a subsidy, grant or bursary
• Sale of shares in a company
• Sale of interest in a P/s or Co
• Donations
• Transactions between branches/ dept
• Journals e.g depreciation, provisions
• Services rendered by employee to employer
• Registration/ licenses
• Taxes or levies under any Act e.g transfer duty
• Sale of goods for which an input tax was denied
Cash basis
Cash basis means VAT is accounted for when
a cash receipt or payment occurs.
‘Deemed’ value
Value of supply for VAT purposes
• The actual consideration
➢ Can be in money or in ‘kind’ → if in ‘kind’ use MV
➢ Transfers between connected persons below MV are
not affected as the actual consideration is important
Special Rules for Timing and Value
(1) Supply of fixed property
TIMING → Earlier of:
• Date of transfer of property effected (title deed)
OR
• any payment is received (even part-payment)
(2) Instalment credit agreements & finance leases
TIMING → Earlier of:
• Goods delivered
• any payment is received (even part-payment) OR
– Date of agreement and invoice date is irrelevant
VALUE→ ‘Cash’ value (excludes Interest)
(3) Lay-by Sales
TIMING → Goods delivered - Any payment forfeited/recovered is taxable
VALUE→ General rule: Consideration; except when on termination or
forfeiture, then the amounts actually recovered.
Special Rules for Timing and Value
(4) Vending machine
TIMING → when the supplier empties the coins/tokens from the vending
machine
(5) Removal of goods from export processing zone
TIMING → When goods removed from zone
(Any payment forfeited / recovered is taxable)
VALUE→ MV of supply at time of removal
(6) Rental agreements (rental of goods, movable and fixed)
TIMING → Earlier: When payment becomes due or is received
(7) Periodic payments for services (e.g. monthly insurance
premiums)
TIMING → Earlier: When payment becomes due or is received
Special Rules for Timing and Value
(8) Gift vouchers
Normally has no VAT consequence, BUT only once voucher issued for an
excess of its monetary value.
TIMING → Time the gift voucher is issued
VALUE→ amount by which the consideration exceeds the monetary value
At surrender, it is seen as a cash payment for the goods or services.
(9) Discount vouchers
The issues has no VAT consequence, BUT the surrender is seen as a
taxable supply: E.g. tickets to entertainment events, or retailer’s discount
vouchers
TIMING → Time the gift voucher is surrendered
VALUE→ Monetary value as per discount voucher, less tax fraction.
➢ The reduction in selling price as same as a trade discount
Special Rules for Timing and Value
(10) Branches
Independent → Own accounting system and can be separately identified
Independent vs Dependent?
Independent branches: TIMING → When goods are physically delivered to
branch or when service rendered
VALUE→ MV of good or services
Dependant branches: The transfer of goods/services is not seen as a taxable
supply. Any supply of goods/services in foreign country is deemed to be in
course of the Namibian enterprise.
(11) Connected persons
To be dealt with later.
Special Rules for Timing and Value
(12) New Registration or business
If goods purchased to bring into his VAT registered business a deemed
supply takes place → The person may claim input tax, provided:
✓ Goods were acquired not more than 4 months before registration
✓ Goods are on hand on date of registration
(13) Deregistration
At date of VAT deregistration a deemed supply of ALL assets of an
enterprise takes place
VALUE→ Market Value
Deregistration
✓ When taxable supplies fall below the VAT thresholds
✓ Ceased taxable activities
✓ Pay output tax on goods on hand at time of deregistration
✓ Goods are on hand on date of registration
VAT Administration
Returns + Payment
(i) VAT Return
• Due every 2nd month
• On the 25th day of the month following the end of the VAT
period
• Due even if a NIL return
(ii) Import VAT Return (Goods)
• Due every month
• On the 20th day of the month following the month of import
• Due even if no imports were made
(iii) Import VAT Return (Services)
• Due only for months where services were imported
• 20 days after date of import
Tax Return
Penalties & interest
Reason Penalty Interest
Late registration Up to 200%
Late submission N$100 per day None
Late payment 10% 20%
Failure to maintain N$3000 per day
records
Incorrect return Up to N$8000
Example
XYQ Namibia (Pty) Ltd submitted their April 2025 VAT return on 31 May
2025 and also paid the VAT due of N$100 000 on the same date. Compute
the penalties due. NB: Highlighted dates indicate public holidays.
MAY 2025
Sun Mon Tue Wed Thur Fri Sat
1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31
Solution
Late return submission Penalty of N$100 x 5 days = N$500
The 25th was a public holiday
Late payment Penalty of 10% x N$100 000 = N$10 000
Late Payment Interest at 20% x N$100 000/365 x 5 days
= N$274
Total N$10 774
Questions
