Botswana Individual Tax Guide

Botswana

Gaborone

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Mail address: 2nd Floor

P.O. Box 41015

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Gaborone Plot 22

Botswana Khama Crescent Gaborone Botswana

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Executive and immigration contacts

Bakani Ndwapi +267 397-4078

Fax: +267 397-4079

Email: bakani.ndwapi@za.ey.com

Cleverent Mhandu +267 365-4045

Fax: +267 397-4079 Email: cleverent.mhandu@za.ey.com

Langton Madzamba +267 365-4003

Fax: +267 397-4079

Email: langton.madzamba@za.ey.com

Farai Mangana +267 365-4031

Fax: +267 397-4079 Email: farai.mangana@za.ey.com

A. Income tax

Who is liable. Individuals earning income in Botswana are subject to income tax.

Individuals are considered resident in Botswana for any tax year (1 July to 30 June) if they meet any of the following conditions:

• Their permanent place of abode is in Botswana.

• They are physically present in Botswana 183 or more days during the tax year.

• After staying in Botswana 183 or more days in a tax year, they physically remain in Botswana into the next tax year, even if they do not stay in Botswana 183 days during the latter tax year.

Income subject to tax

Employment income. With a few exceptions, income derived from sources outside Botswana is not subject to tax. All salaries paid, and benefits provided, for work performed in Botswana are taxable, regardless of where paid or provided. Special tables are used for calculating the taxable value of fringe benefits.

For individuals who receive retrenchment packages, one-third of the amount of the package, or an amount equal to the tax thresh old, whichever is higher, is exempt from tax.

Educational allowances provided by employers to their local and expatriate employees’ children are taxable.

Self-employment and business income. Business profits from self-employment activities are taxed at the rates described in Rates. Partners are individually subject to tax on their shares of business profits. If the owners of a company are residents and if the company’s income is less than BWP300,000, they may elect to have the company’s profits taxed in the same manner as part nership profits.

Directors’ fees Directors’ fees are added to the taxable income of residents and nonresidents. They are subject to withholding tax of 10% and 15%, respectively, effective from 1 July 2021.

Investment income. Royalties and rental income from Botswana sources are also included with other taxable income and are taxed at ordinary rates.

Dividends from resident companies are not included in taxable income and are subject to a 10% final withholding tax. The 10% rate is effective from 1 July 2021.

Interest, royalties, and management and consulting fees paid to nonresidents are subject to a 15% final withholding tax.

Interest paid to residents in excess of BWP7,800 is subject to 10% withholding tax, which is a provisional tax. A credit is granted for the withholding tax against tax chargeable on assessment.

Interest paid to resident individuals by banking institutions or building societies in Botswana is subject to 10% withholding tax. The withholding tax deducted is a final tax, and the interest earned by the individual does not form part of the individual’s assessable income.

Taxation of employer-provided stock options. No specific provi sions regulate the taxation of employer-provided stock options. Under general principles, the employee is taxed at the time of exercise on the difference between the fair market value of the stock at the time of exercise and the strike price.

Capital gains. Capital gains tax is levied on gains derived from the sale of immovable capital assets and from the sale of corporate shares and debentures.

Gains on disposal of a principal private residence (PPR) by an individual are exempt from capital gains tax if the PPR has been held for five years. Any subsequent disposal of the PPR is exempt from capital gains tax if five years have elapsed since the tax year in which the exemption was granted.

To compute capital gains on sales of property acquired before 1 July 1982, the cost of acquisition and improvements is increased at a rate of 10%, compounded for every 12-month period from the date of acquisition to 1 July 1982, and then indexed for infla tion from 1 July 1982 to the date of sale. For property acquired on or after 1 July 1982, the cost of acquisition and improvements is indexed for inflation in computing capital gains.

Only 75% of gains derived from sales of corporate shares is sub ject to tax. Gains on the sale of shares listed on the Botswana

Stock Exchange are exempt from tax if the shares have been held for a period of at least one year.

Net aggregate gains are subject to tax at the following rates.

Taxable gain Tax rate Tax due Cumulative tax due BWP % BWP BWP

First 18,000 0 0 0

Next 54,000 5 2,700 2,700

Next 36,000 12.5 4,500 7,200

Next 36,000 18.75 6,750 13,950

Above 144,000

Deductions

Personal deductions and allowances. A single tax-free allowance of BWP48,000 (the amount is effective from 1 July 2021) is incorporated into the individual tax table applicable to residents. A deduction for approved pension fund contributions is also allowed, limited to 15% of income, excluding investment income

Tax-free gratuities for non-citizens. One-third of a gratuity paid to a non-citizen employee is exempt from tax if the employee has completed a two-year contract of employment and if the gratuity payment is provided for in the employment contract. For the first contract, the one-third exemption is applied up to a maximum of 25% of an individual’s cumulative salary, 27.5% for the second continuous contract and 30% for the third contract and subse quent contracts.

Business deductions. Business expenses of sole proprietorships and partnerships are deductible to the extent incurred in produc ing taxable income. Resident sole proprietors and partners may take the same salary deductions as employees. Rates. The following table sets forth the income tax rates for residents, effective from 1 July 2021.

Taxable income Tax rate Tax due Cumulative tax due BWP % BWP BWP

First 48,000 0 0 0

Next 36,000 5 1,800 1,800

Next 36,000 12.5 4,500 6,300

Next 36,000 18.75 6,750 13,050

Above 156,000 25

The following table sets forth income tax rates for nonresidents, effective from 1 July 2021.

Taxable income Tax rate Tax due Cumulative tax due BWP % BWP BWP

First 84,000 5 4,200 4,200

Next 36,000 12.5 4,500 8,700

Next 36,000 18.75 6,750 15,450

Above 144,000 25

Relief for losses. Losses may be carried forward for five years on a first-in, first-out basis.

B. Capital transfer tax

The recipient of property transferred gratuitously or by inheritance is subject to capital transfer tax. Liberal exemptions apply. For example, all transfers between spouses and the first BWP100,000 transferred by inheritance are exempt. The following rates of capital transfer tax apply to individuals.

Taxable transfer Tax rate Tax due Cumulative tax due BWP

First 100,000

Next 200,000

Next 200,000

500,000

C. Social security

% BWP

2,000

8,000

16,000

Social security taxes are not levied in Botswana.

D. Filing and payment procedures

The tax year runs from 1 July to the following 30 June. Returns are due within 90 days after the end of the tax year, unless an extension is requested. Payment is due within 30 days after assessment.

The pay-as-you-earn (PAYE) scheme covers noncash benefits, including employer-provided housing, utilities and cars. Married persons are taxed separately.

E. Tax treaties

Botswana has entered into double tax treaties with the following countries.

Barbados Mauritius South Africa Eswatini Mozambique Sweden France Namibia United Kingdom India Russian Federation Zambia Ireland Seychelles Zimbabwe

F. Visitor visas

All foreign nationals must obtain valid entry visas to enter Botswana, with the exception of nationals from most British Commonwealth countries and from the following countries with which Botswana has entered into visa-abolition agreements.

Austria Ireland Samoa (Western) Belgium Italy San Marino Denmark Japan Spain Finland Liechtenstein Sweden France Luxembourg Switzerland Germany Mozambique United States Greece Netherlands Uruguay Iceland Norway

Although Bangladesh, Ghana, India, Nigeria, Pakistan and Sri Lanka are British Commonwealth countries, their citizens must have visas to enter Botswana.

All foreign nationals may visit Botswana as visitors or tourists subject to compliance with immigration regulations. Visitors are allowed a maximum of 90-day stays within a 12-month period. On application, they may be permitted by the Chief Immigration Officer to stay longer than 90 days. The various types of visitor visas are described below.

A continuous visa authorizes the holder to enter Botswana on an unlimited number of occasions within a period of 12 months from the date the visa is issued.

A transit visa authorizes the holder to pass through Botswana in transit to other countries for the period endorsed on the visa.

An ordinary visa authorizes the holder to enter Botswana on several occasions for the periods endorsed on the visa. Normally, this visa application takes at least 21 days to be processed. The visa is usually valid for no more than three months.

The following documents are required to apply for all visitor visas:

• A valid passport

• Letter of support from the host

• Letter requesting a visitor visa

Visas are issued at the discretion of the Chief Immigration Officer. Visitors holding all types of visas are expected to provide their own financial support.

G. Work permits and self-employment

Foreign nationals may obtain work permits in Botswana. In gen eral, the permit is granted for the requested period, up to five years. Work permits may be renewed for as long as their holders are employed. A foreign national holding a valid work permit may change employers after signing a contract with the new employer. However, his or her permit is canceled and he or she must reapply with respect to the new company. The approximate turnaround time for obtaining the outcome of a work permit application, after all appropriate documents are submitted, is 10 to 12 weeks.

Foreign nationals may be self-employed in Botswana if they hold investor work permits and residence permits. No set minimum capital investment is necessary. A work permit holder may oper ate any business that is not reserved for the citizens of Botswana.

H. Point-based system to consider applications for work and residence permits

In April 2012, the Ministry of Labour and Home Affairs imple mented a point-based system (PBS) for the assessment of appli cations for work and residence permits. The objective of the PBS is to assist the Ministry of Labour Home Affairs and Regional Immigrants Selection Boards in the facilitation of the inflow of foreign investment into the country and the importation of skills. Under the PBS, points are awarded for the attributes that Botswana considers to be desirable in its immigrants.

Employees. The PBS awards points for employees based on the following categories:

Age

English language ability

Scarce skill (as stipulated on the Skills Occupation List)

Academic qualifications

Professional and technical qualifications

Affiliation to professional bodies

Job offer in Botswana

Residence in Botswana

Partner skills

Spouse of a citizen

Investors. The PBS awards points for investors based on the following categories:

• Business activity (should not be a reserved business activity)

Export focus

• Use of local raw materials

Financial investment

Total investment (including loans)

Proportion of Botswana employees

Proportion of Botswana partners

Age of investor

English language ability

• Educational and professional qualifications (not applicable to businesses that do not require persons with professional quali fications for their operation)

• Specific work experience (dependent on number of years)

Locality of business (rural, peri-urban or urban)

Residence in Botswana

I. Residence permits

The following residence permits are issued in Botswana for the specified durations:

• Business: maximum 10 years

• Employment: maximum 5 years, depending on the duration of the contract

• Religious work: 2 years

• Students: depends on the duration of the course of study

• Dependents: varies based on the sponsor’s residential status

• Research permits: duration according to the period requested

The following documents are required for foreign nationals pursuing business, employment, research and religious work, and for students, immigrants and dependents:

• Completed application form

• Medical forms completed by a medical practitioner

• Valid passport

• Proof of financial means for a dependent or a student

• Proof of investment and clearance from the Ministry of Commerce and Industry for self-employed applicants

• Qualification certificates and proof of employment

The applications for work and residence permits are considered simultaneously by the Regional Immigrants Selection Boards. All permits are renewable for an additional period if the Immigration

Selection Board considers the renewal to be in the interest of Botswana.

The holder of a residence permit must take up residence in Botswana within six months after the date of approval. If he or she does not take up residence within six months, the permit may be canceled.

J. Family and personal considerations

Family members. The working expatriate’s spouse and dependents must obtain separate residence and work permits. The depen dents of an expatriate do not need student visas to attend schools in Botswana.

Driver’s permits. Foreign nationals may drive legally in Botswana using their home-country driver’s licenses. However, the foreign national should apply for a Botswana driver’s license, but no time period is specified for this matter.

Foreign nationals who do not hold valid foreign driver’s licenses must take written and physical driving exams to obtain Botswana driver’s licenses.