Tax in Botswana

1. GENERAL:

• Botswana has the lowest tax rates in Africa and is amongst the lowest taxed countries worldwide.
• The tax regime is Botswana source based, especially for non-citizens. For citizens and companies many offshore transactions are taxable in Botswana, but are subject to double tax agreements or unilateral tax relief.
• For individuals, the tax rate is a progressive, rising from 0% to a maximum of 25%.
• The 25% bracket for individuals is reached when personal taxable income of over P 144 000 per annum is achieved.
• The Capital Gains Taxes payable upon sale of capital assets is lower for individuals than for companies. A number of exclusions are provided in the tax statute.
2. COMPANY TAX:
• For Botswana Companies, the tax rate is a flat rate of 22%.
• Dividends declared are taxed at 7,5% within Botswana.
• Interest is taxed at 10% which is withheld at the financial institution.
• Dividends and Interest, after withholding taxes, are tax free and do not require recording in the personal tax returns.
• Withholding tax is levied upon services provided from offshore service providers.
• Rentals are subject to 5% withholding tax.
• Withholding taxes are also payable upon building contract income at 3%.
3. SPECIAL COMPANIES:

• The Botswana IFSC is similar to the Dublin IFSC (International Financial Services Centre) regime. Tax is levied at 15% and dividends of IFSC Companies are not subject to Dividend Withholding taxes.
• Innovation Hub Companies are taxed at 15% but are subject to dividend withholding tax
• Manufacturing companies are subject to tax at 15% and their dividends are subject to withholding tax.

4. VAT:
• Vat registration is compulsory after the threshold of P 1 000 000 turnover has been achieved.
• Exports are zero rated, as are many specific goods and services, listed in the Botswana Vat Act at the First Schedule.
• Many products and services are exempt from VAT. The list of vat exempt products is found at the second schedule to the Botswana VAT Act.
5. SEZA:
• Botswana has a few economic development zones, such as the SPEDU at Selebi-Phikwe. At SPEDU the tax rate is an initial 5%, rising to 10%, for qualifying companies.
6. DOUBLE TAXATION AGREEMENTS:
• The Botswana Government has negotiated a number of Double Tax Avoidance Treaties, or agreements. The list is growing. The effect of a DTAT is oftentimes beneficial. DTAT are in existence between Botswana and:
• Barbados, India, France, Lesotho, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Sweden, United Kingdom, and Zimbabwe.
• Botswana recently introduced transfer pricing rules, so that non-arm’s length agreements between a Botswana business and an offshore connected person, are subject to adjustment by the Botswana Tax Authorities.
• Recordkeeping and returns submission requirements are strictly enforced. It is important to plan the Botswana business structure carefully and to ensure that high compliance standards are maintained.
• If recordkeeping and returns are not adequate, penalties and interest accrue and assessed losses cannot be carried forward.
7. TAXATION ON THE BOTSWANA INTERNATIONAL TRUST:

• Botswana has a source-based tax system. This differs from that in SA. In fact, the system is mixed, in that non-Citizens of Botswana are taxed only on the Botswana - source income, whilst Botswana Companies and Citizens are taxed on worldwide income.

• The Beneficiaries of the Botswana Trust, as non-Citizens, do not pay any tax in Botswana, because they are out of the tax net. Any offshore (non- Botswana) investment income will be tax free in the hands of the trustees, because the beneficiaries are non-Citizens.
• Should the trust have Botswana Rental Income, this will be taxed in the hands of the trust at 25%. There is no withholding tax because the trust is not a company.
• Dividends received from Botswana are tax free after withholding tax of 7,5% has been paid in Botswana, by the declaring company.
• Interest earned in a financial institution is subject to a 10% withholding tax, which is a final tax. Thus, Botswana interest received is effectively tax free.
• Trust income is taxed in the hands of beneficiaries; however, non-citizen beneficiaries are not taxed on offshore investment income.
Disclaimer: Swiss Africa Praesidium Ltd (BW00000410311) is a fiduciary company and Swiss Africa Secretarial Company (Pty) Ltd (BW00000118867) is a secretarial company, both incorporated and regulated in Botswana. Information contained in this communication is for informational purposes alone and is not to be construed as financial and/or investment advice unless specifically referred to as such.

Swiss Africa Praesidium is able to offer consultancy services in line with
cross border income tax,
Import and export Vat,
Security of assets and investments,
Trusts and Estate planning.
Our tax team is well versed in taxes within the region