Namibia joined the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) Project of the OECD/G20 in August 2019, and undertook to implement mechanisms and tools to strengthen domestic tax laws, curb tax evasion, tax avoidance, base erosion and profit shifting (BEPS), as well as to sfight illicit financial flows.
The Convention is one of the tools formulated under Action 15 of the OECD/G20 BEPS Project to prevent treaty abuse by multinational enterprises and to improve the efficiency and timeliness of the settlement of double taxation disputes between tax jurisdictions.
Deputy prime minister and minister of international relations Netumbo Nandi-Ndaitwah vested powers in Namibia’s ambassador to France Albertus Aochamub to sign the Convention on behalf of finance minister Ipumbu Shiimi on 30 September 2021. The signing ceremony took place at the OECD headquarters in Paris.
According to Namibia Revenue Agency spokesperson Yarukeekuro Ndorokaze, the Convention is the first multilateral treaty of its kind, allowing member states to swiftly integrate results from the BEPS Project into existing networks of bilateral tax treaties in a synchronised and coordinated manner, and without the need for costly and time-consuming bilateral negotiations.
Further, the Convention enables countries to only go through a single ratification procedure in their respective Parliament to modify the whole treaty network rather than seeking to ratify or amend each bilateral tax treaty separately.
The Convention is the world’s leading instrument for updating bilateral tax treaties and reducing opportunities for tax avoidance by multinational enterprises. It currently covers 94 tax jurisdictions, including 53 tax jurisdictions that have already deposited their instrument of ratification, acceptance or approval.
“By joining the Convention Namibia has aligned its tax treaty network with the treaty-related BEPS minimum standards. Additionally, Namibia may elect to adopt other treaty-related BEPS measures to strengthen its treaty network, including measures to address the creation of a permanent establishment, and hybrid mismatch arrangements that potentially distorts the tax system,” Ndorokaze stated. The Convention only takes effect with respect to a particular tax treaty where both treaty partners have ratified it and listed their tax treaty as an agreement to be covered.
Through the Convention Namibia may introduce a limitation of benefit clause to prevent treaty abuse by individuals and entities shifting profits to low-income countries or apply beneficial ownership requirements to prevent intermediaries being entitled to relief or specific anti-abuse rules based on the legal nature, ownership and general activities of tax treaty residents.