Botswana Domestic Corporate Taxation

See International Financial Services Centre for details of the privileged tax regime introduced in 1999 for international companies.

Value Added Tax at a rate of 10% was introduced in 2002 to replace the previous General Sales Tax. This was increased to 12% effective April 2010 as a result of the 2010 budget. The registration threshold was also increased, from BWP250,000 to BWP500,000.

Important changes to the corporate tax regime in Botswana were announced in the 2010 budget (see below).

In July, 2004, Botswana's Finance and Development Planning Minister, Baledzi Gaolathe announced changes aimed at broadening the tax base, limiting exemptions and promoting compliance to raise an estimated BWP50 million (USD10.8 million). Among the measures were limitations to exemptions on the disposal of shares, limitations on the deductions for lease payments for the use of motor cars, and restrictions on deductions for farming losses.

Gaolathe also outlined plans to enhance the valuation of the housing benefits that some employers extend to employees as fringe benefits. "The valuation of the benefit is being increased from 6% to 10% of the rateable value and in the case of properties that are not rated, the valuation is being enhanced from 5% to 8% of the current capital valuation of such property," the Minister explained.

In another revenue raising measure, charitable, religious and other mutual benefit organisations will be subjected to tax "unless they prove to the Commissioner, by filing tax returns and supporting documents that the income they derive has been or will be applied for public purposes."

In delivering his maiden State of the Nation address in November 2008, President Ian Khama said there are concerns that the tax system in Botswana is complicated and is a disincentive to investors. "We are thus in the process of reviewing the tax system with the aim of simplifying it," the President said. "In addition, we will continue to seek double taxation agreements to reduce the cost of doing business in Botswana."

In the 2010 budget, the Minister of Finance and Development Planning announced that the two-tier corporate tax system would be replaced by a single company tax rate of 25% of profits. Companies designated as manufacturing and International Financial Services Centre-registered will be taxed at 15%, with a final 7.5% withholding tax on dividend distributions. These changes were effective July 1, 2010. The minister also announced that the requirement for commercial parastatals to pay 25% of their profits to the government will be "strictly enforced."

The 2011 budget the Minister announced the planned privatisation of some parastatals in addition to merging others, such as the Botwana Postal Service and Botswana Savings Bank. The 2011 budget saw a reduction in the corporate income tax rate to 22% for resident companies, an increase from 25% to 30% and a reduction of the dividend withholding tax rate to 7.5%.

The corporate tax incentives and specific benefits available to Botswana IFSC companies were unchanged by the 2010 budget.

The following information describes the tax situation in Botswana prior to the changes announced in the 2010 budget.

Botswana Corporation Tax

In Botswana, income taxes are levied on income that is actually derived or deemed to be derived from Botswana sources, including income accruals and specified capital accruals.

Legislation governing taxation is contained in the Income Tax (Amendment) Act 1995, the Income Tax (Amendment) Act 2005 and the Income Tax (Amendment) Act 2006, the latter of which removed all references to the current tax year.

The tax is payable annually on income accrued in each tax year ending on 30 June. In the case of a business where proper books of accounts are kept, the business accounting year may be substituted.

Tax is payable on taxable income, i.e., that part of the gross income remaining after deducting exempt income, allowable deductions and certain reliefs.

Resident companies pay company tax at 15% of taxable income plus 10% additional company tax, and are obliged to deduct withholding tax at 15% on all dividends distributed. This deducted tax is available to the company to be off-set against the additional company tax liability (this privilege was withdrawn as from 1st July 2003).

Resident Companies are those companies that either have their registered offices or places of incorporation in Botswana, or which are managed and controlled in Botswana.

Non-Resident Companies are those companies whose registered offices or places of incorporation are not in Botswana or which are managed and controlled from outside Botswana. Non resident companies pay tax at 25% of their taxable income (15% company tax plus 10% additional company tax).

Capital allowances are as follows:

Plant and machinery: an annual allowance ranging from 10% to 25% of the cost can be claimed for plant and machinery. For convenience the rates are fixed at 10% for plant and machinery with long life, 15% for those with medium life and 25% for those with short life.
Buildings: new buildings and improvements to existing buildings, used in an industrial business are entitled to an initial allowance of 25%. Industrial business includes a process of manufacture, a hotel business and the letting of a building for an industrial business.
Buildings used in an industrial business and commercial buildings are entitled to an annual allowance of 2.5% of the cost. An allowance of P 5,000.00 is permitted in respect of the cost of erection of each dwelling to accommodate employees of any business other than the business of mining.

An employer can claim a deduction of 200% of the cost of training his Batswana employees on training approved by the Commissioner.

In the event that a business falls within the definition of "Manufacturing" and is approved by the Minister of Finance, it is entitled to additional tax relief, which is a reduction in corporate tax to 15%, i.e. 5% company tax and 10% additional company tax.

In considering the application for approval the Minister will have regard to:

the number of citizens employed
the training of citizens
the replacement of non-resident employees with skilled citizens
citizen management participation
the level of citizen investment or opportunity thereof

Taxation of special entities

Under the Income Tax Amendment Act 2006, new definitions for investment company, investment income, securitization and special purpose vehicle were provided, including:

Botswana Capital Gains Tax

The income accruing from the disposal of a principal private residence will be exempt from tax if the proceeds are re-invested in another residential property within 24 months of the disposal of the principal private residence. However, if the disposal gains are not so reinvested within a period of 24 months, the exemption would be available only in respect of the most recent disposal of the principal private residence.

The following rates apply:

Taxable gains between zero and P15,000: 0%
Taxable gains between P15,001 and 60,000: 5%
Taxable gains between P60,001 and 90,000: P2,250 plus 12.5% of the excess over P60,000
Taxable gains between P90,001 and 120,000: P6,000 plus 18.75% of the excess over P90,000
Taxable gains over P120,001: P11,625 plus 25% of the excess over 120,000

Shares, units or debentures of a public company or those actually traded on the Botswana Stock Exchange are exempt from disposal gains tax.

For companies that have released 49% or more of their equity shares for trading on the Botswana Stock Exchange, sale of any of their equity shares are eligible for tax exemption from the disposal gains tax. This exemption excludes proceeds arising from sales of shares, units or debentures undertaken by investment or similar companies where the shares, units or debentures are disposed of for profit generation in the ordinary course of business.

Disposal of shares of International Financial Service Centre companies are tax exempt. Sale of shares of companies, whose underlying dominant assets are immovable properties that result in effectively transferring the property, will be deemed to be the sale of the immovable properties and subject to tax on disposal gains. Disposal gains on bonds and debentures issued by Government, Bank of Botswana, parastatals and special purpose vehicles formed for the securitisation of public debt are exempted from tax.

Further, disposal gains arising on the sale of shares in an IFSC company are also be exempted from tax.

Botswana Withholding Tax

Dividends: 7.5% (15% prior to July 2011) on dividends paid to residents and non-residents, unless the withholding tax rate is varied by a Double Taxation Avoidance Agreement.

Interest: 15% on interest paid to non-residents. 10% on amounts in excess of BWP1,950 (BWP1,500 prior to July 2011) in a quarter or BWP7,800 (BWP6,000 prior to July 2011) per year.

Commercial Royalties: 15% tax to non-residents for use of or rights to patents; trade-marks; copyrights; secret formulas; and industrial, commercial or scientific equipment or information.

Construction Contracts: The Commissioner of Taxes must be advised of all non-resident contracts relating to construction contracts which are in excess of BWP5,000.00. Payments under such contracts are subject to a withholding tax of 3%.

In the case of all other withholding taxes, the tax withheld is the final tax. Non-residents need not file tax returns if they have no other income.

Amendments to the Income Tax Act passed in 2004 include a tighter definition of the 3% withholding tax charged on construction contracts in order to combat evasion of the levy in the sector, and the removal of the exemption from the 15% withholding tax on dividends for associated companies (a firm where the parent company holds more than 20% of its stock.)

In its 2006 budget, the government announced that any interest payable to residents in excess of P6,000 per year or P1, 500 per quarter or P500 per month, payable by banks and financial institutions on deposits, Bank of Botswana Certificates, bonds and securities, except in the case of entities that are exempt from payment of tax, will be subject to 10% withholding tax.

This will not be a final tax as taxpayers will still be allowed to file their tax returns and claim credit for tax withheld, if any. However, interest received by IFSC companies, banks and financial institutions, which are supervised by the Bank of Botswana or other statutorily established agencies will continue to be exempted from withholding tax.

Botswana Customs Duties

As a member of the Common Custom Area (CCU) along with South Africa, Lesotho, Swaziland and Namibia, Botswana follows Common Tariffs of Ad Valorem Customs Duty, Excise Duty as well as Surcharges and other duties. There is an additional Specific Excise Duty which is imposed on most luxury items.

However the Government safeguards its basic industries under the infant industry clause of the Southern African Customs Union (SACU) by providing tariff protection to such industries by levying import duties on the member countries, thereby enabling them to compete successfully with the SACU.

The Department of Industrial Affairs has a number of incentives that it offers to manufacturers to allow them to import raw materials and/or capital goods duty free for export in accordance with the provisions laid down by the Customs and Excise Act. These incentives include duty rebates, drawbacks of duty and duty exemption permits.

There are some provisions in the Customs Tariff Book exempting payment of certain customs and excise duties as well as sales tax on raw materials imported by registered manufactures or industries. One of these rebate of duty concessions, known as Industrial Rebate concession found under Schedule 3 of the Tariff book, exempts from payment of customs duties, some raw materials the products of which may either be sold locally or externally. Here the customs duty liability will cease as soon as the goods are manufactured or exported. Industrial Rebates are accessible to identified industries that government would like to stimulate such as textiles, prepared foodstuff, beverage industries.

Raw materials that are not exempted under the foregoing provision may, where they are imported for manufacturing and ultimate re-exportation, be exempted under General Rebate of duty concession provided for under Schedule 4 of the Tariff Book. Also admissible under this rebate of customs duty provision are raw materials that are unavailable locally. Once these raw materials become available, the rebate concession is withdrawn. It is perhaps worth noting that only companies that are producing exclusively for export can register for this rebate of duty concession.

One other option available to exporters is for them to claim refund on any customs duties that they may have paid on manufacturing materials that they imported into the country for their finished products. Here a trader upon exporting and within a period of six months may claim back an amount equivalent to what s/he paid as customs duties and sales tax.

The Duty Credit Certificate (DCC) Facility is a product specific (clothing and clothing accessories, household textiles, yarn, fabrics and other textiles) rebate of duty facility which is extended to companies that have been exporting products of such materials to markets outside the SACU area for a period of at least a year. Unlike other rebates of duty, the amount of duty that a company qualifies for as credit under DCC is calculated as a given percentage of the value of the exported goods as opposed to actual rate of customs duty or sales tax. At the time of writing, the value of credit certificates as a percentage of sales value of proven exports is: 25% for clothing and accessories; 8% for yarn; 17.5% for household textiles; and 12.5% for fabrics and other textiles.

Once a trader has been issued with a DCC, subsequent importation of raw materials will attract free of customs duties against the balance on the DCC.

In order for a company to be allowed to import materials under any of the above rebate of duty concessions, it must first apply to the director of customs and excise to be licensed to operate a rebate store. All materials imported under rebate of duty will be taken straight from a port of entry to the rebate store and no other material may be allowed into the rebate store. The only rebate of duty concession that does not require a bonded store is the one relating to equipment imported temporarily into Botswana for a specific project.

Application forms that must be filled out are known as CE 100 and CE 100A. These forms, which can be collected from any Customs and Excise office, captures details such as names of directors, nature and quantity of materials to be imported, expected annual production and details of the manufacturing process involved. In addition, a sketch plan of the geographical location and that of machinery layout must be attached to the application forms.

A certificate of incorporation and a trading license must also be attached to affirm that the business is legally registered to operate.

A bond form that should be authorized by a recognized bank or insurance company in Botswana must accompany a completed application form. The bond amount should be sufficient to cover potential customs duties and/or sales tax on the maximum quantity that the rebate store can hold at a given time.

An import permit must also be attached for those goods that the ministry of Trade, Industry, Wildlife and Tourism has regulated that they require such permit.

Before any establishment can be licensed as a rebate store, an inspection by the department will be carried out to ensure that it is in conformity with all requirements of a rebate store.

Any registered rebate user may at any given time submit a written request to the Director of Customs and Excise for de-registration. This will be granted once all customs duties and sales tax liabilities have been amicably settled. The Director of Customs and Excise reserves the right to de-register any rebate user if any provision under which the rebate was given is violated.

That is to say, after the elapse of the bond period, applicable customs duties and/ or sales tax becomes due and payable and, the bond will then be called to suit as customs duties and/ or sales tax. A bond form can be collected from the headquarters of the department of Customs and Excise (Excise Unit) and lodged with any recognized commercial bank or insurance company in Botswana.

Lowtax Jurisdictions

Botswana: Domestic Corporate Taxation

On this Page:

Botswana Corporation Tax

Botswana Capital Gains Tax

Botswana Withholding Tax

Botswana Customs Duties

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