Gaborone GMT +2
EY Street address: Mail address: 22 Khama Crescent P.O. Box 41015 Second Floor Gaborone Gaborone Botswana
Indirect tax contacts
Cleverent Mhandu +267 397-4078 +267 365-4045 cleverent.mhandu@za.ey.com
Langton Madzamba +267 397-4078 +267 365-4003 langton.madzamba@za.ey.com
A. At a glance
Name of the tax
Value-added tax (VAT)
Local name Value-added tax (VAT)
Date introduced 1 July 2002
Trading bloc membership Southern African Customs Union, Southern African Development Community (SADC)
African Continental Free Trade Area (AfCFTA)
Administered by Botswana Unified Revenue Service (http://www.burs.org.bw)
VAT rates
Standard 14% Other Zero-rated (0%) and exempt
VAT number format
VAT return periods
Registration thresholds
A unique VAT number for individuals, partnerships and trusts is system-generated and auto-allocated
Monthly (annual taxable supplies greater than BWP12 million) Bimonthly (annual taxable supplies below BWP12 million)
BWP1 million
Recovery of VAT by non-established businesses No
B. Scope of the tax
VAT applies to the following transactions:
• The supply of goods and services in Botswana by a taxable person
• Reverse-charge services received by a person making exempt supplies in Botswana
• The importation of goods from outside Botswana, regardless of the status of the importer
Goods that are imported from countries within the Southern African Customs Union (consisting of Botswana, Lesotho, Namibia, South Africa and Eswatini) are not subject to customs duty.
C. Who is liable
Any registered person that makes supplies of taxable goods and services in Botswana in the course of a business is liable for VAT. For this purpose, a person includes the state, a local authority, board, natural person, trust, company and partnership.
The VAT registration threshold is BWP1 million. A taxable person must notify the Botswana VAT authorities of its liability to register for VAT within 21 days after becoming liable.
Exemption from registration. The VAT law in Botswana does not contain any provision for exemp tion from registration.
Voluntary registration and small businesses. The VAT law of Botswana provides for voluntary VAT registration where any person applies for voluntary registration where the person’s turnover is below the BWP1 million threshold and meets the following criteria:
• The person has a fixed place of abode or business in Botswana
• The person can keep proper records
• Submits regular and reliable VAT returns, as required under the VAT Act
Group registration. Group VAT registration is not allowed in Botswana.
Non-established businesses. A “non-established business” is a business that has no fixed establish ment in Botswana. A non-established business that makes supplies of goods or services in Botswana must appoint a representative in order to register for VAT. The representative must be resident in Botswana.
Tax representatives. In the case of a nonresident person, a tax representative is a public officer, director, trustee, partner, liquidator or other person who controls the nonresident person’s affairs in Botswana. The Commissioner General may, if they consider it necessary, declare any person to be a representative of a registered person.
Reverse charge. Under the reverse-charge mechanism, VAT is payable by the importer on the importation of a service, if the service is imported for use in making exempt or nontaxable supplies. The VAT is payable within 30 days of the importation. The importer of the service in Botswana is required to complete form VAT 017 when making the VAT payment.
Domestic reverse charge. There are no domestic reverse charges in Botswana.
Digital economy. Nonresident providers of electronically supplied services for business-to-busi ness (B2B) supplies are not required to register and account for VAT on supplies in Botswana. Instead, the customer is required to self-account for the VAT due. This only applies if the customer imports the service to make nontaxable or exempt supplies (e.g., supplies by financial institutions such as banks or life insurance businesses). In that case, the customer is not allowed to claim the VAT as input tax, so the payment would not be VAT-neutral. For B2B supplies where the customer imports the service to make taxable supplies, no VAT is accounted for on the elec tronically supplied service.
Nonresident providers of electronically supplied services for business-to-consumer (B2C) sup plies are not required to register and account for VAT. Instead, the customer (as an individual) is expected to self-assess VAT on the payment, as the individual will be importing the service to make nontaxable supplies.
There are no other specific e-commerce rules for imported goods in Botswana.
Online marketplaces and platforms. No special rules exist for online marketplaces and platforms in Botswana.
Registration procedures. Application for registration is accomplished by manually completing form
BURS1 and submitting it, stamped and signed by the local bankers, by post to the Revenue Authority with copies of the following documents:
• ID or passport for two directors
• ID or passport for public officer (tax representative, who should be a resident)
• Certificate of Incorporation
• Memorandum and Articles of Association (if available)
• Forms 2, 2A, B, C and D (list of directors)
• A list of assets (if any)
• Details of local bank accounts
Deregistration. A person who intends to deregister is required to complete application form IRD/ DE-REG1. The process takes 3 to 12 months and may involve an audit.
Changes to VAT registration details. Registered persons shall notify the Commissioner General, in writing, of the following changes:
• Any change in the name, address, place of business, constitution or nature of the principal taxable activity or activities of the person
• Any change of address from which, or name in which, a taxable activity is carried on by the registered person, within 21 days of the change occurring
D. Rates
The term “taxable supplies” refers to supplies of goods and services that are liable to a rate of VAT, including the zero rate.
The VAT rates are:
• Standard rate: 14%
• Zero-rate: 0%
The standard rate of VAT applies to all supplies of goods or services unless a specific measure provides for the zero rate or an exemption.
The standard VAT rate increased from 12% to 14% from 1 April 2021.
Examples of goods and services taxable at 0%
• Exports of goods and services
• International transport
• Sale of a business as a going concern to a registered person
• Fuel for vehicles
• Illuminating paraffin
• Sorghum and maize meal for human consumption
• Bread flour, sugar, brown bread, fresh fruits, rice, milk and samp (coarsely ground corn)
• Intellectual property rights for use outside Botswana
• Household consumption of water up to 5,000 liters or 25 drums of 200 liters
The term “exempt supplies” refers to supplies of goods and services that are not liable to VAT and that do not qualify for input tax deduction.
Examples of exempt supplies of goods and services
• Medical services provided in a public medical facility
• Supply of prescription drugs
• Education
• Some agricultural farming implements
• Financial services (unless provided for a fee, charge or commission)
Option to tax for exempt supplies. The option to tax exempt supplies is not available in Botswana.
E. Time of supply
The time when VAT becomes due is called the “time of supply” or “tax point.” In Botswana, the basic tax point is the earlier of the issuance of an invoice or the receipt of any payment.
Other tax points are used for a variety of situations.
The following is the tax point for supplies between related persons:
• For a supply of goods, either when the goods are removed or when they are made available to the purchaser or recipient of the goods
• For a supply of services when the services are performed
The tax point for periodic supplies is the earlier of the date on which payment is due or the date on which payment is received.
The tax point for goods or services provided to a branch or principal business outside Botswana is when the goods are delivered or when the services are performed.
Deposits and prepayments. The tax point for the supply of goods or services on payment of a deposit (other than a deposit paid on a returnable basis) is when the supplier applies the deposit as consideration for the supply, or when the deposit is forfeited.
For deposits paid on a returnable basis, the time of supply is when the deposit is paid or invoiced, whichever is earlier.
The time of supply for supplies of goods or services on payment of a prepayment is when the prepayment is received.
Continuous supplies of services. As under operating leased assets, supplies are treated as succes sively supplied for successive parts of the period of the agreement, and each of the successive supplies occurs when a payment becomes due or is received, whichever is the earlier.
Goods sent on approval for sale or return. There is no special time of supply rule in Botswana for supplies of goods sent on approval for sale or return. As such, the general time of supply rules applies, which as outlined above, is the earlier of the issuance of the invoice or the receipt of payment.
Reverse-charge services. The recipient of imported services is required to self-assess for VAT within 30 days of importation of the service. No reverse-charge mechanism applies in Botswana on the importation of goods.
Leased assets. For operating leases, assets are treated as successively supplied for successive parts of the period of the agreement, and each of the successive supplies occurs when a payment becomes due or is received, whichever is the earlier.
For finance leases (i.e., credit agreements), the time of supply is when the goods are delivered or the time any payment for the supply is received, whichever is earlier.
Imported goods. The tax point for imported goods depends on the customs regime that applies to the import. The following are the applicable rules:
• For imported goods that must be cleared through customs under the Customs and Excise Duty Act, when the goods are cleared
• For goods that are imported from the Southern African Customs Union, when the goods are brought into Botswana
• For goods imported and entered into a Customs and Excise bonded warehouse, when the goods are cleared from the warehouse
The tax point for imported services is 30 days from the date of importation.
VAT-registered persons may apply for a VAT-deferment account. The importer is authorized to pay VAT on imports 25 days after the end of the month in which the goods are imported. To qualify for a deferment account, the importer must place with the VAT office a bond equal to the great er of BWP20,000 or 20% of its estimated monthly imports. Input tax paid through the VATdeferment account may be reclaimed only if it has actually been paid.
F. Recovery of VAT by taxable persons
A taxable person may recover input tax, which is VAT charged on goods and services supplied to it for business purposes. Input tax is claimed by deducting it from output tax, which is VAT charged on supplies made.
The time limit for a taxable person to reclaim input tax in Botswana is four months. This is from the date of the invoice. Input tax includes VAT charged on goods and services purchased within Botswana and VAT paid on imports of goods.
Nondeductible input tax. VAT may not be recovered on purchases of goods and services that are not used for business purposes (for example, goods acquired for private use by an entrepreneur). In addition, input tax may not be recovered on certain specified business expenses.
The following lists provide some examples of items of expenditure for which input tax is not deductible even if the expenditure is for purposes of making a taxable supply and examples of items for which input tax is deductible if related to a taxable business use.
Examples of items for which input tax is nondeductible
• Purchase and hire of passenger cars
• Entertainment including food, accommodation and hospitality of any form
• Sponsorship that constitutes entertainment subscriptions to sports and recreational clubs
Examples of items for which input tax is deductible (if related to a taxable business use)
• Purchase, hire and maintenance of non-passenger motor vehicles
• Maintenance of passenger motor vehicles
• Advertising
• Parking
• Mobile phones
• Business use of a home telephone (but an employer is liable to VAT if it pays for the private telephone bills of the employee)
Partial exemption. VAT directly related to making exempt supplies is not recoverable. A registered person who makes both exempt and taxable supplies cannot recover input tax in full. This situa tion is referred to as making “mixed supplies.”
VAT that relates to making mixed supplies must be apportioned using a method acceptable to the tax authorities to allocate the VAT between taxable supplies and exempt supplies. Every registered person who is required to apportion the input tax credits should advise the Commissioner in writing of the proposed apportionment, which should be based on the prior financial year proportions between taxable and exempt turnover. Input tax related to taxable supplies may be deducted in full. VAT related to exempt supplies may not be deducted. If taxable supplies exceed 90% of the total supplies made by a registered person, all VAT incurred by the registered person may be claimed as input tax.
Capital goods. A VAT-registered person can recover input tax incurred on acquisition or importation of capital goods used for making taxable supplies. Capital goods means assets that are
subject to capital allowances under the Income Tax Act. If the capital goods are used for taxable and exempt supplies, the portion of input tax relating to exempt supplies that is not recoverable is capitalized to be part of cost of the asset, and so is the VAT paid on capital goods that is not recoverable as input tax, e.g., VAT on capital goods used for entertainment. The input tax is recovered at the same time and in same manner as other VAT on acquisition or importation of the goods.
Refunds. A VAT-registered person is entitled to a refund of excess input tax if input tax exceeds output tax in a tax period. The VAT authorities must pay VAT refunds by the following deadlines:
• One calendar month following the due date of the return for exporters, operators of VAT manufacturing warehouses and international financial service center companies
• Two calendar months following the due date of the return for all other registered persons
Before any refund is paid, the input tax credit is applied against any tax, levy, interest or penalty payable by the registered person (under the terms of the VAT Act, the Customs and Excise Duty Act or the Income Tax Act).
Pre-registration costs. A VAT-registered person can recover input tax incurred on costs in the first tax period in which the person is registered for VAT in respect of the following:
• Taxable supplies of goods, other than capital goods, made to the person
• Any imports of goods, other than capital goods, made by the person prior to becoming regis tered, to the extent that the goods are for use or resupply in a taxable activity carried on by the person after registration, provided the goods are not supplied or imported more than four months prior to the date of registration
Bad debts. A VAT-registered person can claim VAT on a bad debt that has been written off. The VAT is claimed on the later of the date the bad debt was written off, or 12 months after the end of the tax period in which the VAT on the bad debt was accounted for. When the bad debt is recovered, the registered person is required to recoup the VAT previously allowed as input tax.
Noneconomic activities. Input tax incurred on purchases that are used for noneconomic activities is not recoverable in Botswana.
G. Recovery of VAT by non-established businesses
Input tax incurred by non-established businesses in Botswana is not recoverable.
H. Invoicing
VAT invoices. Registered persons must provide VAT tax invoices for all taxable supplies made, including exports.
Credit notes. A VAT tax credit note may be used to reduce the VAT charged on a supply of goods or services. Tax credit and debit notes must show the same information as tax invoices.
Electronic invoicing. Electronic invoicing is allowed in Botswana, but not mandatory. There are no rules restricting the use of electronic invoicing in Botswana.
Simplified VAT invoices. A VAT-registered person can issue simplified VAT invoices (by way of a nontax invoice or receipt), provided the amount does not exceed BWP20.
Self-billing. Self-billing is allowed in Botswana, provided both the buyer and seller are registered for VAT and they have agreed that the buyer will issue the tax invoice and not the seller, and the Commissioner General has granted written approval to issue a “recipient-created tax invoice.”
Proof of exports. Goods exported from Botswana are zero-rated. However, to qualify for a zero rating, exports must be supported by evidence that proves the goods left Botswana.
Foreign currency invoices. A Botswana VAT tax invoice must be issued in the domestic currency, which is the Botswana pula (BWP). If an amount is expressed in a currency other than pula, the following are the rules for converting the VAT and value amounts to local currency:
• For imports, the amount must be converted at the exchange rate determined by the Customs and Excise Duty Act.
• For other supplies, the amount must be converted at the exchange rate at the time when VAT is accounted for on the supply.
Supplies to nontaxable persons. Full VAT invoices do not need to be issued for supplies with consideration less than BWP20 and for supplies to any persons who are not registered for VAT.
Records. A registered person or any other person liable for tax under the VAT Act, must maintain these records in Botswana, in the English or Setswana language:
• Original tax invoices, tax credit notes and tax debit notes received by the person
• A copy of all tax invoices, tax credit notes and tax debit notes issued by the person
• Customs documentation relating to imports and exports by the person
• Accounting records
• Any other records as may be prescribed by the Commissioner General
Record retention period. Records are required to be kept in Botswana for a period of seven years.
Electronic archiving. Electronic archiving is not allowed in Botswana. Hard copies of the original tax invoices received for claiming input tax should be kept, and also copies of the invoices issued by the registered persons.
I. Returns and payment
Periodic returns. The VAT tax period is one month for registered persons with annual taxable sup plies greater than BWP12 million and two months for registered persons with annual taxable supplies of equal to and less than BWP12 million.
Returns must be filed on or before the 25th of the month following the end of the tax period. If the due date falls on a Saturday, Sunday or public holiday, the due date is the last business day before the holiday.
Periodic payments. Payment is due in full by the same date as the return submission, i.e., on or before the 25th of the month following the end of the tax period.
Electronic filing. Electronic filing is allowed in Botswana, but not mandatory. VAT returns can be filed electronically upon application for e-services, which enable taxable persons to view the VAT returns submitted and other tax information online.
Payments on account. A registered person can apply to the Commissioner General to extend the time or make other arrangements for the payment of VAT, but such arrangements will not waive the charging of interest on the staggered or delayed payments.
Special schemes. No special schemes are available in Botswana.
Annual returns. Annual returns are not required in Botswana.
Supplementary filings. No supplementary filings are required in Botswana.
Correcting errors in previous returns. Where errors have occurred from a previous manual submission, taxable persons must notify the tax authorities in writing explaining the reason and result of the error. The tax authority will give direction to the taxable person regarding the next steps. Such steps include the taxable person being asked to come to the tax authorities’ offices and amend the original submission and sign for the amendment.
Where the submission was made electronically, the taxable person may be asked to amend the return online and the tax authority will, if in agreement, approve the amendment so that it reflects on the taxable person’s account/tax statement.
Digital tax administration. There are no transactional reporting requirements in Botswana.
J. Penalties
Penalties for late registration. The following penalties apply if a person fails to register for VAT within 21 days after becoming liable:
• If the failure was due to recklessness or made knowingly, a fine not exceeding BWP10,000 or imprisonment for a period not exceeding two years, or both
• In all other cases, a fine not exceeding BWP5,000 or imprisonment for a period not exceeding one year, or both
• A penalty of twice the output tax payable from the time when the person became liable to the time when the person registered for VAT
Any offense committed by a corporate body is deemed to have been committed by a person acting as a representative officer, director, general manager, secretary or other similar officer of the company, or by any other person acting in such a capacity.
Penalties for late payment and filings. The greater of the following penalties is imposed for the late filing of the VAT return:
• BWP50 per day Or
• 10% of the outstanding tax for each month or part of a calendar month that the return remains outstanding.
The penalty is limited to the amount of the tax due. In the case of nil VAT returns, the maximum penalty is BWP5,000.
Interest is charged on outstanding tax at a rate of 1.5% per month (compounded).
Penalties for errors. Penalties are not charged where the Commissioner considers that any error on the VAT return is genuine, e.g., transposition of figures on the VAT return.
A person who fails to notify the Commissioner General of a change in its VAT registration details commits an offense and is liable on conviction:
• Where the failure was made knowingly or recklessly, a fine not exceeding P10,000 or imprison ment for a term not exceeding two years, or both
• In any other case, a fine not exceeding P5,000 or imprisonment for a term not exceeding one year, or both.
Penalties for fraud. Penalties are imposed in respect of any offenses, including making false state ments and obstructing a VAT officer.
Prosecution proceedings may be instituted against offenders and where a person is convicted, no penalties will be charged.
Any offense committed by a corporate body is deemed to have been committed by a person acting in a responsible capacity, such as a representative officer, a director, a general manager, a com pany secretary or any similar officer of the company or any other person acting in such a capac ity.
Personal liability for company officers. A person who was a director of the company at the time of the commission of any errors and omissions in VAT declarations and reporting shall be liable, jointly and severally, for any tax payable by the company, unless that person proves to the
satisfaction of the Commissioner General that the failure by the company to pay the tax was not due to any negligence on their part.
Statute of limitations. The statute of limitations in Botswana is five years. Where the Commissioner General is not satisfied with a return or import declaration furnished by a taxable person, they can reassess the return or import declaration within five years from the date the return was furnished or when the import was made.
However, the reassessment can be made at any time where the default was due to fraud; or due to gross or willful neglect committed by, or on behalf of, the taxable person who furnished the return or import declaration.