VAT and Namibian tour operators
Chantell Husselmann - Given the devastating impact on the Namibia tourism industry by the Covid-19 pandemic and the much needed gradual return of tourists after relaxation of travel restrictions locally and globally, highlighting the value-added tax (VAT) rules for this important industry is necessary to not only ensure compliance with...
The VAT Act defines a “tour operator” as any person whose supply mainly consists of packaged holiday tours with all arrangements made at an inclusive package price.”
This definition, however, was open to many interpretations, accordingly Inland Revenue issued Practice Note No. 12 shortly after promulgation of the VAT Act to clarify the meaning of “supply mainly consists of package holiday tours”.
The Practice Note provides that the word “mainly” is interpreted to mean more than 50%. In other words, if the supply of package tours with all arrangements made at an inclusive price is more than 50% of all other supplies offered by a tourism business in Namibia, the business is regarded as a tour operator for VAT purposes.
Since it remains a factual interpretation, it is suggested that written confirmation be obtained to confirm whether a business undertaking is indeed regarded as a tour operator in order to qualify for, among others, the following special rules available to tour operators.
PASSENGER VEHICLES
In general, the VAT payable on a passenger vehicle is not deductible for VAT purposes.
A tour operator, however, may deduct the input tax (VAT) payable on a passenger vehicle bought for the business. A passenger vehicle is defined as a motor vehicle principally designed or adapted to carry nine or fewer seated persons and includes a double cab.
ENTERTAINMENT
The claiming of input tax on entertainment, defined as “the provision of food, beverages, tobacco, accommodation, amusement, recreation or hospitality of any kind” is denied in the VAT Act to most businesses.
However, where a tour operator provides taxable supplies of entertainment in the ordinary course of the business to its clients, the input tax (VAT) payable on the acquisition of goods and services which relates to the supply of entertainment will qualify as a deduction on input VAT.
A tour operator supplying food, refreshments, accommodation or other services to clients may deduct the VAT payable when the goods were bought.
CONCLUSION
Should a business meet the criteria for a “tour operator” per Inland Revenue guidelines, the claiming of input tax with valid tax invoices for the aforementioned, could have a positive impact on the cash-flow of that business.
It is important for tour operators to consult with their tax advisors to ensure they benefit from all available provisions contained within the VAT Act.
Chantell Husselmann is the country senior partner and tax leader at PwC Namibia. Contact her at [email protected]
This definition, however, was open to many interpretations, accordingly Inland Revenue issued Practice Note No. 12 shortly after promulgation of the VAT Act to clarify the meaning of “supply mainly consists of package holiday tours”.
The Practice Note provides that the word “mainly” is interpreted to mean more than 50%. In other words, if the supply of package tours with all arrangements made at an inclusive price is more than 50% of all other supplies offered by a tourism business in Namibia, the business is regarded as a tour operator for VAT purposes.
Since it remains a factual interpretation, it is suggested that written confirmation be obtained to confirm whether a business undertaking is indeed regarded as a tour operator in order to qualify for, among others, the following special rules available to tour operators.
PASSENGER VEHICLES
In general, the VAT payable on a passenger vehicle is not deductible for VAT purposes.
A tour operator, however, may deduct the input tax (VAT) payable on a passenger vehicle bought for the business. A passenger vehicle is defined as a motor vehicle principally designed or adapted to carry nine or fewer seated persons and includes a double cab.
ENTERTAINMENT
The claiming of input tax on entertainment, defined as “the provision of food, beverages, tobacco, accommodation, amusement, recreation or hospitality of any kind” is denied in the VAT Act to most businesses.
However, where a tour operator provides taxable supplies of entertainment in the ordinary course of the business to its clients, the input tax (VAT) payable on the acquisition of goods and services which relates to the supply of entertainment will qualify as a deduction on input VAT.
A tour operator supplying food, refreshments, accommodation or other services to clients may deduct the VAT payable when the goods were bought.
CONCLUSION
Should a business meet the criteria for a “tour operator” per Inland Revenue guidelines, the claiming of input tax with valid tax invoices for the aforementioned, could have a positive impact on the cash-flow of that business.
It is important for tour operators to consult with their tax advisors to ensure they benefit from all available provisions contained within the VAT Act.
Chantell Husselmann is the country senior partner and tax leader at PwC Namibia. Contact her at [email protected]
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