Transfer Pricing Defence for a Uranium Mining Subsidiary

A subsidiary of an international mining group operating a uranium extraction project in the Erongo Region, with its parent company registered in Europe.

NamRA issued a transfer pricing query following the subsidiary's annual income tax return, flagging intercompany management fees paid to the parent and royalty charges that appeared disproportionate to local revenue. The subsidiary had no transfer pricing documentation on file and had never prepared a master file or local file. The parent group's advisors were based in Europe and unfamiliar with Namibian transfer pricing rules under the Income Tax Act. The client faced a potential reassessment and needed local representation urgently.

We prepared a transfer pricing policy document and local file covering the three intercompany transactions under review: management fees, royalties, and a shareholder loan. We benchmarked each transaction using comparable uncontrolled price and cost-plus methods, drawing on publicly available mining sector comparables. We prepared a formal response to NamRA's query and represented the client through the audit correspondence phase, providing technical submissions on each challenged item.

NamRA accepted the documentation and withdrew two of the three challenges. The third item, the royalty rate, was settled between the original and NamRA's proposed adjustment. The reassessment was reduced by approximately 70% from the figure initially indicated. The client has engaged us on an annual basis for transfer pricing maintenance going forward.