Botswana
7. Capital transfer tax has remained unchanged at 12.5%. 8. CGT at 22% has been proposed. 9. Local dividends are exempt. However, dividends from sources outside Botswana are subject to a flat rate of 15%. 10. Approved financial operations that qualify as an International Financial Services Centre (IFSC) company include banking and financing operations, broking and trading of securities, investment advice, management and custodial functions in relation to collective investments, insurance and related activities, exploitation of intellectual property, and accounting and financial administration. In the past, IFSC companies were only allowed to do business with non-residents. The rule was relaxed in 2006/07 to allow such companies to transact with related companies which have existing operations in Botswana. 11. The effective rate for manufacturing and IFSC companies will remain unchanged at 15%. 12. For mining projects commenced prior to 1 July 1998, a company has the option to be taxed either: • At a rate according to the mining tax formula (as set out below) and be allowed an immediate 100% write-off of exploration and development expenditure; or • At the normal corporate tax rates, and write-off the mining expenditure over the life of the mine or 10 years, whichever is the lesser period. Mining projects commenced after 1 July 1998 are taxed at a rate according to the formula with a 100% write – off of exploration and development expenditure. Tax rate = 70 – 1 50 x where x is the ratio expressed as a percentage of taxable income to gross income, subject to a minimum tax rate of 25%.
35
Guide to Fiscal Information
13. Amounts contributed to an approved mine rehabilitation fund are, from 1 July 2011, a deductible expense. The investment income of the fund will be exempt from tax and a 10% WHT on the refund of excess contributions from the fund to the contributor, will apply. 14. An assessed loss may be carried forward for five years. Mining and farming losses can be carried forward indefinitely. However, the amount of farming losses that can be claimed against non-farming income is limited to 50% of the non-farming income. 15. Relief from double taxation is provided in the form of a foreign tax credit. The credit may be granted under a tax treaty or unilaterally under Botswana domestic tax law. In the latter case, the credit is limited to the amount of Botswana tax applicable on the foreign income. 16. The exemption from income tax and CGT, of public benefit organisations (PBOS), will only be available to those organisations which satisfy the Commissioner that such income is applied for public benefit purposes. 17. There are currently no anti-avoidance rules for transfer pricing, thin capitalisation, controlled foreign companies and disclosure requirements. 18. The payment of the training levy is officially a deductible expense (from 1 July 2011) and any refund received from BOTA is assessable income. The double deduction will now only apply to training costs to which there is no entitlement to a BOTA refund. 19. No payroll or social security tax is imposed on corporations.
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