Mining companies to pay tax once they start making profits

Mining companies will start paying corporate tax sooner after they become profitable, unlike in the past when they could use past losses to delay paying tax for years.

The measure forms part of tax reforms introduced in recent national budgets, in which finance minister Ericah Shafudah announced that the government would tighten tax deduction rules while broadening the corporate income tax base.

Historically, Namibia’s tax system allowed companies to carry forward assessed losses for many years and deduct them against future profits. 

The minister first spoke about the move in her 2025/26 budget speech when she said capping assessed losses carried forward in the mining sector and a 10% divided tax would take effect on 1 January 2026.

“This is undertaken concurrently with other measures to broaden the corporate income tax base including introducing a 30% limit on interest deductions,” Shafudah said then.

Presenting the 2026/27 national budget last week, Shafudah confirmed that the government would proceed with the tax reforms to broaden the corporate income tax base, including limits on interest deductions and capping of carried-forward losses.

Mining companies will now only be allowed to offset assessed losses of up to N$10 million against taxable income in a given year.

Any accumulated losses above that threshold will remain on the books but cannot be fully used in a single tax year to reduce taxable income.

An assessed loss arises when a company’s allowable deductions exceed its taxable income in a particular year.

This typically happens during exploration, feasibility studies and mine construction phases when companies incur large capital costs before generating revenue.

Historically, Namibia’s tax system allowed companies to carry forward assessed losses for many years and deduct them against future profits.

This allowed companies to recover large development expenditures over time by reducing their taxable income in profitable years.

Broader tax reform

The new cap alters that dynamic by limiting how much of those historic losses can be applied in a single year.

As a result, mining firms may face taxable income sooner after production stabilises, even if they still carry substantial accumulated losses from earlier development stages.

The move to limit how companies use accumulated tax losses forms part of a broader tax reform agenda that began under former finance minister Iipumbu Shiimi, who introduced amendments to the Income Tax Act in parliament to tighten corporate tax rules and improve revenue collection.

Shiimi first motivated the changes in August 2024 when he introduced the Income Tax Amendment Bill in the National Assembly, arguing that some companies had operated for years without paying corporate tax because they continuously declared losses.

Motivating the amendments, Shiimi said the government had observed that some large companies — including those in resource industries — had operated for many years without paying corporate income tax because they continuously reported losses.

“You will find a company that has been in operation for 15 years claiming to have been making losses, and not paying company tax for that period,” Shiimi said at the time.

He said the reforms were intended to ensure that businesses eventually contribute tax once they become profitable.

“We are now saying that there must be a limit of five years for a non-mining company, and 10 years for a mining company.

“The principle is that companies can no longer carry on losses forever. They must reach a stage where they can pay tax,” Shiimi said during the parliamentary debate.

The amendments were later enacted as the Income Tax Amendment Act, 2024 and gazetted on 16 September 2024.

Largest contributors

The government has been seeking ways to secure more predictable tax inflows from key sectors such as mining, which remains one of Namibia’s largest contributors to export earnings and fiscal revenue.

According to the Chamber of Mines of Namibia, the industry paid roughly N$3.008 billion in corporate taxes in 2024, alongside N$2.256 billion in royalties and about N$360 million in export levies.

In total, the sector contributed around N$5.62 billion directly to the national fiscus that year.

Mining projects are particularly sensitive to the tax treatment of accumulated losses due to the industry's capital-intensive nature.

Companies often spend years on exploration drilling, feasibility studies, environmental approvals and construction before the first tonne of ore is processed.

Those early investments can run into the billions of dollars and often result in substantial tax losses during the development phase.

Historically, the ability to carry forward those losses has allowed companies to stabilise cash flows once production begins by offsetting early profits against the accumulated development costs.

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