Country Name: Republic of Botswana
Currency: Botswana Pula (BWP)
Primary Tax Authority: Botswana Unified Revenue Service (BURS)
Key Legislation:
- Income Tax Act
- Value Added Tax (VAT) Act
- Customs and Excise Duty Act
- Investment Law (Botswana Investment and Trade Centre)
Fiscal Authority Allocation
Centralized Fiscal System:
Botswana operates a centralized tax system. The Botswana Unified Revenue Service (BURS) under the Ministry of Finance administers and collects taxes, including corporate income tax (CIT), personal income tax (PIT), value-added tax (VAT), and customs duties. Local taxes are limited.
Corporate Income Tax (CIT)
Standard Rate: 22%
Botswana imposes a flat corporate income tax rate of 22% on resident companies and foreign companies with a permanent establishment in Botswana. For manufacturing companies and companies involved in innovative activities, the rate is 15%.
Corporate Forms and Taxation:
- Resident Companies: Taxed on worldwide income.
- Non-Resident Companies: Taxed only on Botswana-sourced income.
Exemptions and Incentives:
- Investment Incentives: Botswana offers tax holidays and reduced CIT rates for companies investing in priority sectors such as manufacturing, agriculture, and innovation. The government provides five-year tax holidays for eligible businesses.
- Special Economic Zones (SEZs): Companies operating in SEZs benefit from reduced CIT rates, VAT exemptions, and customs duty exemptions on imports of raw materials and capital goods.
Goods and Services Tax (GST) / Value-Added Tax (VAT)
Standard Rate: 14%
Botswana imposes VAT at a standard rate of 14% on most goods and services. VAT is applied to domestic production and imports.
Reduced Rates:
Some goods and services, such as basic food items and agricultural products, are taxed at a reduced VAT rate of 0% or 5%.
Exemptions:
Certain essential goods and services, such as healthcare, education, and financial services, are VAT-exempt. Exports are zero-rated, allowing businesses to reclaim VAT paid on inputs used in export production.
Personal Income Tax (PIT)
Progressive Rates:
Botswana applies a progressive personal income tax system to residents’ worldwide income and non-residents’ Botswana-sourced income.
Resident Tax Rates for 2023 (Annual Income):
- Up to BWP 36,000: 0%
- BWP 36,001 to BWP 72,000: 5%
- BWP 72,001 to BWP 108,000: 12.5%
- BWP 108,001 to BWP 144,000: 18.75%
- Above BWP 144,000: 25%
Non-Resident Tax Rate:
Non-residents are taxed at a flat rate of 25% on Botswana-sourced income.
Deductions and Allowances:
Taxpayers can deduct contributions to pension funds, social security, medical expenses, and charitable donations.
Additional Mandatory Contributions
Social Security Contributions:
Botswana does not have a mandatory social security contribution system. However, certain employers provide private pension and healthcare schemes for employees.
Withholding Taxes
- Dividends: 7.5%
- Interest: 15%
- Royalties: 15%
Botswana imposes withholding taxes on payments to non-residents, including dividends, interest, and royalties. These rates may be reduced under Botswana’s double taxation agreements (DTAs).
Transfer Pricing Rules
Botswana follows OECD guidelines on transfer pricing. Companies engaging in related-party transactions must apply the arm’s-length principle. Transfer pricing documentation is required for transactions exceeding a certain threshold.
Special Tax Regimes
- Special Economic Zones (SEZs): Companies operating in SEZs are offered various tax incentives, including CIT holidays, VAT exemptions, and customs duty relief on imported machinery and raw materials.
- Investment Incentives: Botswana provides five-year tax holidays, reduced CIT rates, and customs duty exemptions to companies investing in sectors like manufacturing, tourism, and agriculture.
Other Taxes
- Customs Duties: Botswana imposes customs duties on imports, with rates varying based on the type of goods. As a member of the Southern African Customs Union (SACU), Botswana follows SACU’s customs tariffs and policies.
- Excise Taxes: Excise taxes are levied on specific goods, such as alcohol, tobacco, and petroleum products. Rates vary depending on the product.
- Capital Gains Tax: Capital gains from the sale of assets are taxed at a maximum rate of 25%.
Double Taxation Agreements (DTAs)
Botswana has signed several double taxation agreements (DTAs) with countries such as the United Kingdom, South Africa, and Mauritius. These agreements help reduce withholding taxes on cross-border income and prevent the double taxation of income earned in Botswana and other jurisdictions.
Local Taxes
Local authorities in Botswana may impose minor municipal fees, such as business license fees and property rates. However, most major taxes, including CIT, PIT, and VAT, are centrally administered by BURS.
Compliance and Reporting
Annual Filing:
Corporate tax returns must be filed by the end of the fourth month following the end of the financial year. Personal income tax returns are generally due by June 30th. VAT returns are filed monthly or quarterly, depending on turnover.
Penalties for Late Filing:
Penalties for non-compliance or late filing include fines and interest on unpaid taxes. Interest is generally charged at a rate of 1.5% per month on overdue tax amounts, with additional penalties for underreporting or tax evasion.
Recent Developments
Focus on Diversification:
Botswana’s government is working to diversify the economy beyond mining, particularly diamonds. New policies focus on promoting sectors such as tourism, agriculture, and renewable energy, with tax incentives and infrastructure investments aimed at attracting foreign direct investment (FDI).
Digital Taxation Initiatives:
Botswana is exploring new tax measures targeting the digital economy, including e-commerce and online services. The government has introduced policies to improve taxation compliance for digital businesses.
Green Economy and Renewable Energy Projects:
Botswana is promoting investment in renewable energy, especially solar power, to reduce its reliance on fossil fuels. Tax incentives are available for companies investing in clean energy projects, including CIT holidays, VAT exemptions, and customs duty reductions on imported solar equipment.
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