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High level tax considerations for telecoms industry
High level tax considerations for telecoms industry

High level tax considerations for telecoms industry

Jo-Mare Duddy Booysen
Bianca Cooper - Certain aspects of the Namibian Income Tax and VAT Acts need to be taken into account to ensure that telecommunication service providers not only adhere to the regulations per the Post and Telecommunications Act by which they are governed, but to ensure that they remain tax compliant as well.

Below are some of the general points that specifically apply to this industry:

VALUE-ADDED TAX

• The term “telecommunication services” is defined in the Post and Telecommunications Act and includes internet services and data charges.

• In terms of the VAT Act, the supply of telecommunication services is a taxable supply, meaning that telecommunications service providers will charge VAT on services they provide to customers at either the standard rate of 15% or 0%. Services to residential accounts are specifically zero-rated. VAT to other customers will be charged at 15%.

• The VAT Act defines the term “services” which explicitly excludes “goods”. This is why goods such as the router supplied to a residential account will still attract VAT at 15%.

• Prepaid data or airtime vouchers are also subject to VAT at 15% as these are sold to the general public and not supplied specifically to a residential account. This has only been applied from around 2010 as vouchers were previously zero-rated. However, the industry-wide change did not result from a change in VAT legislation but rather from the correct interpretation of the legislator’s initial intention.

CORPORATE INCOME TAX

• In the telecommunication industry, it can be argued that costs incurred especially on testing of new networks, construction and acquisition of towers and power cables respectively can be capitalised. A section 17(1)(e) capital allowance is claimable for “expenditure incurred for the acquisition of vehicles, aircraft, sea-going craft, machinery, implements, utensils and articles used by the taxpayer for the purpose of the taxpayer’s trade...”. Therefore the above mentioned assets can be claimed over 3 years in accordance with Section 17(1)(e).

• When a deposit is received for a service to be rendered (for example: landline account, wifi account ect.), it should be considered when this becomes taxable. In terms of the gross income definition, income is taxable on the earlier of receipt or accrual. Deposits received are considered to be taxable, except when the deposits are kept in a separate trust/bank account. This is applicable irrespective of whether there is an obligation to refund the money. Once the money has been received and the taxpayer is able to use the money for its own benefit, the amounts are taxable.

• Prepaid expenses actually incurred in the ordinary course of the business/production of income and which are not of a capital nature, are deductible for tax purposes. Where amounts are paid in advance, for example insurance, use of a license etc., the amounts paid can be deducted when calculating taxable income.

The above points are by no means an exhaustive list of matters applicable when working with the tax affairs of a telecommunications service provider. We recommend such businesses to consult with a tax expert where uncertainties may arise.

Bianca Cooper is the manager: indirect tax at PwC Namibia. Contact her at [email protected]

The article was co-authored by Riana Esterhuyse, associate director: corporate and international tax at PwC Namibia.

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Namibian Sun 2024-03-28

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Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 221.22/OZ UP +1.39% | Copper US$ 3.99/lb UP +0.14% | Zinc US$ 2 452.00/T DOWN -0.18% | Brent Crude Oil US$ 87.50/BBP UP +1.29% | Platinum US$ 907.52/OZ UP +1.41% Sport results: Weather: Katima Mulilo: 19° | 37° Rundu: 17° | 33° Eenhana: 18° | 33° Oshakati: 20° | 31° Ruacana: 19° | 33° Tsumeb: 17° | 29° Otjiwarongo: 16° | 28° Omaruru: 18° | 31° Windhoek: 17° | 28° Gobabis: 17° | 28° Henties Bay: 16° | 19° Wind speed: 24km/h, Wind direction: S, Low tide: 10:54, High tide: 04:57, Low Tide: 22:58, High tide: 17:16 Swakopmund: 15° | 17° Wind speed: 29km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:55, Low Tide: 22:56, High tide: 17:14 Walvis Bay: 16° | 22° Wind speed: 33km/h, Wind direction: SW, Low tide: 10:52, High tide: 04:54, Low Tide: 22:56, High tide: 17:13 Rehoboth: 18° | 29° Mariental: 22° | 32° Keetmanshoop: 21° | 34° Aranos: 21° | 31° Lüderitz: 15° | 29° Ariamsvlei: 23° | 34° Oranjemund: 15° | 21° Luanda: 27° | 30° Gaborone: 20° | 32° Lubumbashi: 17° | 24° Mbabane: 15° | 23° Maseru: 12° | 28° Antananarivo: 16° | 27° Lilongwe: 17° | 29° Maputo: 20° | 28° Windhoek: 17° | 28° Cape Town: 17° | 23° Durban: 21° | 25° Johannesburg: 18° | 28° Dar es Salaam: 26° | 32° Lusaka: 18° | 30° Harare: 15° | 31° Economic Indicators: Currency: GBP to NAD 23.86 | EUR to NAD 20.43 | CNY to NAD 2.62 | USD to NAD 18.93 | DZD to NAD 0.14 | AOA to NAD 0.02 | BWP to NAD 1.33 | EGP to NAD 0.39 | KES to NAD 0.14 | NGN to NAD 0.01 | ZMW to NAD 0.74 | ZWL to NAD 0.04 | BRL to NAD 3.8 | RUB to NAD 0.2 | INR to NAD 0.23 | USD to DZD 134.05 | USD to AOA 832.63 | USD to BWP 13.71 | USD to EGP 47.35 | USD to KES 130.98 | USD to NGN 1415.13 | USD to ZAR 18.93 | USD to ZMW 25.01 | USD to ZWL 321 | Stock Exchange: JSE All Share Index 74536 Up +0.85% | Namibian Stock Exchange (NSX) Overall Index 1528.69 Up +0.84% | Casablanca Stock Exchange (CSE) MASI 12986.94 Up +0.04% | Egyptian Exchange (EGX) 30 Index 27559.35 Down -2.36% | Botswana Stock Exchange (BSE) DCI Same 0 | NSX: MTC 7.75 SAME | Anirep 8.99 SAME | Capricorn Investment group 17.34 SAME | FirstRand Namibia Ltd 49 DOWN 0.50% | Letshego Holdings (Namibia) Ltd 4.1 UP 2.50% | Namibia Asset Management Ltd 0.7 SAME | Namibia Breweries Ltd 31.49 UP 0.03% | Nictus Holdings - Nam 2.22 SAME | Oryx Properties Ltd 12.1 UP 1.70% | Paratus Namibia Holdings 11.99 SAME | SBN Holdings 8.45 SAME | Trustco Group Holdings Ltd 0.48 SAME | B2Gold Corporation 47.34 DOWN 1.50% | Local Index closed 677.62 UP 0.12% | Overall Index closed 1534.6 DOWN 0.05% | Osino Resources Corp 19.47 DOWN 2.41% | Commodities: Gold US$ 2 221.22/OZ UP +1.39% | Copper US$ 3.99/lb UP +0.14% | Zinc US$ 2 452.00/T DOWN -0.18% | Brent Crude Oil US$ 87.50/BBP UP +1.29% | Platinum US$ 907.52/OZ UP +1.41%