The Ministry of Finance’s Chief Public Relations Officer, Tonateni Shidhudhu urged businesses to keep paying their value-added tax (VAT), a consumption tax, payable on the purchase of products or services, in order to maintain their good standing status.
The “proof” concept behind a good standing certificate is fairly simple. However, any failure to maintain good standing is a compliance red flag that needs immediate attention. Generally, a Certificate of Good Standing simply indicates that the entity has filed all reports and fees with the Inland Revenue Department at the Ministry of Finance. It serves as proof, or evidence, that the entity exists and is authorized to transact business in Namibia.
“VAT is levied at the standard rate of 15% on the supply of most goods and services and on the importation of goods. It is mandatory for a person who carries on a business with an annual taxable turnover above N$500,000 to apply for VAT registration in order to obtain a good standing certificate which is renewable after every 3 month” Shidhudhu said.
Good standing certificates are applicable after every month, with some individuals saying that the period is too short; appealing to the ministry to consider an extension in its validity. Shidhudhu, however, clarified that the certificates are valid for a specified period because taxpayer’s record can change within that period from good to bad.
Shidhudhu elucidated that a Good Standing Certificate certifies that a business is in good standing with the receiver of revenue. It is also used as a prerequisite for participating in tender applications to ensure that a business that is being awarded the tender pays tax which is a requirement of the law.
“VAT status is very important when bidding for tenders because it qualifies you to obtain a Finance Good standing certificate which is a mandatory document in tender application” he added.
The Inland Revenue department checks whether or not a business is VAT registered. This information will be checked as well as establishing whether the company is trading or dormant, is up to date with its financial returns and whether it is owned by another company or supported by a venture capital organization.