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Taxation
Taxation In Botswana

TAXATION

BOTSWANA INCOME TAX LEGISLATION

DIRECT TAXES (INCOME TAX)
Botswana is a source-based country. Tax in Botswana is charged progressively. The gross income of every person is the total amount, whether in cash or otherwise, accrued or deemed to have accrued to that person in that tax year from every source situated or deemed to be situated in Botswana but does not include any amounts of capital nature.

According to Botswana Income Tax Act, an amount, which accrues to person, is deemed to have accrued –
(a) in case of employment, at the time it is:
(i) received by that person;
(ii) due and payable, even though not actually paid to him; or
Credited in account, reinvested, accumulated, capitalized, carried to reserve or otherwise disposed
(b) in case of business, in relation to which the Commissioner is satisfied that a commercially recognized system of accounting is regularly followed, at the time it is credited in the books of account of such person; or
(c) In any other case, at the time it becomes due and payable to the person. 

AMOUNTS DEEMED TO BE BOTSWANA SOURCED
An amount accrued to any person is deemed to have accrued from a source situated in Botswana where it has accrued to such person in respect of:
(a)   any contract made by such person in Botswana for sale of goods, whether such goods have been or are to be delivered in or out of Botswana;
(b) any service rendered or work done by such person in Botswana, whether the payment thereof is made by a resident or a non-resident and wherever payment is made.
(c)  any service rendered or work done out of Botswana:
(i) by such person under a contract of employment with the Government,
(ii) by such person, being a resident, for or on behalf of his employer in Botswana during that person’s temporary absence from Botswana, whether the payment for such service rendered or work done is made by a resident or a non resident and wherever the payment is made;
(d) any pension, bonus, gratuity or compensation granted to such person in respect of past services-
i) by the Government; or
ii) where such past services were performed in Botswana by any other persons, and wherever payment is made or the funds from which payment is made are situate.
Where any pension, bonus, gratuity or compensation is payable in respect of  
(e)  any business carried on by such person, being a resident, as the owner or character on any aircraft, whether such aircraft may be operated;
(f) Any service rendered or work done out of Botswana by such person, being a resident, as an officer or a member of the crew of any aircraft referred to in paragraph above statement whenever payment is made;
 The disposal by such person of any interest in mineral rights over land situate in Botswana or the disposal of any share or interest in the capita)  any business carried on by such person, being a resident, as the owner or character on any aircraft, whether such aircraft may be operated;
(g) The disposal by such person of any interest in mineral rights over land situate in Botswana or the disposal of any share or interest in the capital or l or

(h) The disposal by such person of mining or prospecting information or mining or prospecting rights over land situate in Botswana or any investment made outside Botswana or any business carried on outside Botswana by a resident of Botswana

Working in Botswana

Individuals’ residents have a threshold of P30 000 (US$ 5000. 00) while non –residents have no threshold. The rates for tax brackets are the same.

Doing business in Botswana

Companies: Current tax rate for residents and non-residents is 25%
Withholding tax rate:  15% on commercial royalties and management fees payable to
       non-residents.
      15% on interest payable to both resident and non residents;
      15% on dividends payable to both residents and non-residents
      10% on entertainment fees payable to non residents

Domestic Foreign Tax Relief

Since Botswana is a source-based country, there is not much foreign earned income that we tax, except where the amounts are deemed to be sourced in Botswana. In such cases, we achieve this through issuance of credits, which are limited. If the income taxable in Botswana was taxed in another jurisdiction that has a Double Taxation Avoidance Agreement with Botswana the taxpayer is given credit for the tax paid in that other jurisdiction.  The credit is limited to the amount of tax payable in Botswana.

Application of Income Tax to Foreign Income of a Resident

Income from any investment made outside Botswana or any business carried on outside Botswana by a resident of Botswana is deemed to be sourced in Botswana and is taxable in Botswana.  If the income was taxed in the country where business is located or situated then a credit will be given and then the income will be still taxable in Botswana provided there is a double taxation avoidance agreement between Botswana and the jurisdiction where the income was sourced.  This does not apply to foreign investment income of non-citizens resident in Botswana.

Taxation of non-residents in Botswana

The taxable income of a non-resident is charged to tax on an agent in the same amount as would have been charged on the non-resident. An agent should be related to the non resident in the sense that the agent is a resident in Botswana and has the management and control of property in Botswana of such non-resident or who is appointed by a non–resident to act on his behalf.
Income of non- residents:

Domestic Foreign Tax Relief

Since Botswana is a source-based country, there is not much foreign earned income that we tax, except where the amounts are deemed to be sourced in Botswana. In such cases, we achieve this through issuance of credits, which are limited. If the income taxable in Botswana was taxed in another jurisdiction that has a Double Taxation Avoidance Agreement with Botswana the taxpayer is given credit for the tax paid in that other jurisdiction.  The credit is limited to the amount of tax payable in Botswana.

Exemption from Tax

Any amounts accrued from a business or employment carried on in Botswana by a citizen of any other country or by a company registered under any law in force in any other country, where such business or employment is carried on in Botswana under an agreement with the Government for the provision of technical assistance to the Government to the extent to which the Minister may, by notice in writing to the Commissioner, declare such amounts to be exempted from tax.

Any amount accrued from an employment carried on by a non-resident aboard an aircraft or road or rail vehicle in course of the operation of an international transport service by a non-resident.

Any amount payable as a pension under the Overseas Officers’ Pensions Agreement (Implementation Agreement.)

Any amount accrued to the government of any other country, or to any non –resident institution or company by way of interest or interest on any loan, to the extent  to which the Minister  is satisfied  that the  exemption  of such  amount is in  the public interest.

Fiscal Promotions for Companies

Botswana has a very good tax incentive package. For instance, we tax the manufacturing and the International Financial Services Centre at a reduced rate of 15% (compared to the current corporate tax rate of 25%) 

Promotions for companies are covered under Development Approval Order.
Under this order, depending on the scale and the magnitude of the project companies can apply for tax holidays. Normally it is granted to companies, which are carrying out big projects.   The tax holidays are restricted to five or ten years depending the scale and the magnitude of the project.

Training Benefits - Taxation

The other fiscal promotions benefited by companies is that companies are allowed to deduct 200% as an allowable expense from their income after training their employees at Botswana accredited institutions.

  Eligibility for claim of deduction
   Employee should be a Motswana
Either in full-time or part employment with such employer; and
 undertaking  or has undertaken  education  of training  relevant  to the  employment  of such  employee but which does not  include secondary  or primary education.

Training which may qualify: University, polytechnic or other public institution for education  or training in or outside Botswana, which is approved by the Botswana Training Authority.

A training establishment approved by the Botswana Training Authority;
   Which is situated at the employer’s own place of business; and
  At which a training officer who holds academic or professional qualifications or has experience considered adequate by the Botswana Training Authority is employed wholly or substantially for the purpose of training.

 

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