High Court Rules Against NamRA’s Tax Setoff

A significant tax ruling from the High Court of Namibia has clarified the limits of NamRA’s authority when it comes to tax collection and company liabilities. The case, Obie Logistics (Pty) Ltd v. NamRA, involved a dispute over a N$1.2 million tax refund that NamRA withheld to offset a N$53 million tax debt owed by a different company, Obie Transport.

NamRA justified this action by pointing out that both companies were owned and directed by the same individual, Josias Oberholster. However, the court ruled against NamRA, stating that the setoff was not legally valid.

Key Legal Findings

The court’s decision was based on two critical factors:

1. The tax debt was from before the law changed – The N$53 million tax liability arose in the early 2000s, but NamRA relied on Section 83D of the Income Tax Act, 1981 which was only introduced in 2015. The court ruled that this law cannot be applied retroactively to debts incurred before it existed.

2. Obie Transport was liquidated – Since Obie Transport no longer exists as a legal entity, the liability belonged to the dissolved company. The court found that Obie Logistics, as a separate company, could not be held responsible for the debts of another entity.

Court Decision & Implications

The High Court ruled that NamRA had no legal basis for setting off one company’s refund against another’s tax debt. As a result, NamRA was ordered to refund the N$1.2 million to Obie Logistics within 60 days.

This ruling is an important reminder for accountants and tax professionals that:

• Separate legal entities must be treated separately – Even if a director owns multiple companies, their tax liabilities remain distinct unless the law states otherwise.

• Tax laws cannot be applied retroactively – New laws cannot be used to enforce tax debts from before they were enacted.

Broader Tax Policy Concerns

While the ruling protects taxpayers from unfair setoffs, it also raises concerns about tax enforcement. NamRA’s argument highlights a common tax risk—where directors can accumulate tax debts in one entity, liquidate it, and starting fresh under a new company. This poses challenges for tax compliance and enforcement.

• Should Namibia consider new tax policies to hold directors accountable for tax debts under certain conditions?

• What measures can be implemented to prevent tax avoidance while maintaining fair business practices?

This case sets a precedent for future tax disputes and could lead to policy discussions on how Namibia enforces corporate tax obligations. Accountants should take note of these developments when advising clients with multiple business entities.