BotswanaTax Obligations Detailed

In Botswana, employers have various tax obligations, primarily focusing on Pay As You Earn (PAYE) and withholding taxes.

Employer Tax Obligations in Botswana

As of February 5, 2025, the following employer tax obligations are in effect in Botswana:

PAYE (Pay As You Earn)

• Registration: Employers with employees are required to register for PAYE, which is linked to income tax registration. A Tax Identification Number (TIN) will be issued upon registration.
• Monthly Remittance: Employers must deduct PAYE from employees earning above the taxable threshold of P2500 per month. The tax rate depends on the employee's income level, as detailed in the Tax Tables and Guidance notes issued by the Botswana Unified Revenue Service (BURS). These deductions should be remitted to BURS by the 15th of the following month, using the prescribed forms (ITW 7A and REM 2).
• Annual Return: An annual PAYE return, detailing total tax deducted, must be submitted within 31 days of the tax year's end (June 30).
• Tax Certificates: Employers must issue tax certificates to each employee subject to PAYE within 31 days of the tax year's end.

Withholding Tax

• Non-Residents: Employers paying non-residents dividends, interest, fees (management, consultancy, entertainment), royalties, or construction-related payments must withhold tax at the applicable rate and issue a withholding tax certificate. Double taxation agreements may modify these obligations.
• Residents: Withholding tax applies to payments to residents for dividends, interest, rent, construction payments, commissions, or brokerage fees. A withholding tax certificate must be issued.
• Livestock Purchases: A 4% withholding tax applies to payments for livestock bought for slaughter or feeding for slaughter.
• Remittance and Returns: Withheld tax amounts are due to BURS within 15 days of the following month. Annual withholding tax returns should be filed within one month of the tax year's end.

Other Employer Obligations

While not strictly taxes, employers should be aware of the following:

• Private Pension and Insurance: In the non-public sector, contributions to private pension and insurance schemes are generally required, up to a maximum of 15% of the employee's salary. There is no national social security system mandating specific contributions.

Corporate Income Tax (CIT)

• Botswana's corporate income tax (CIT) rate is generally 22%. However, a reduced rate of 15% applies to manufacturing companies with ministerial approval and companies operating within the International Financial Services Centre (IFSC).
• An Additional Company Tax (ACT) of 10% is also levied. When companies distribute dividends, a 15% withholding tax is applied. This withheld amount can be offset against the company's ACT liability, and any excess ACT can be carried forward for five years.

Please note that this information is current as of February 5, 2025, and might change due to legislative updates or adjustments.

In Botswana, employee tax deductions primarily revolve around Pay As You Earn (PAYE), calculated based on income and remitted by the employer.

PAYE (Pay As You Earn)

PAYE is the system for deducting income tax from employee remuneration. Employers are responsible for calculating the tax based on the employee's earnings and remitting it to the Botswana Unified Revenue Service (BURS). "Remuneration" is broadly defined and includes salaries, wages, bonuses, allowances, commissions, pensions, lump-sum payments, and non-cash benefits.

Non-Cash Benefits

Non-cash benefits, such as employer-paid school fees, utilities, motor vehicle expenses, housing, furniture, interest-free loans, or shares at discounted prices, are considered part of remuneration and are subject to PAYE. These benefits are valued according to guidelines provided by BURS.

Allowable Deductions

While there are no standard or personal deductions for employees, contributions to approved retirement funds (where no gratuity is provided) are deductible up to a maximum of 15% of earned income. Business-related expenses are generally not deductible unless they are a necessary condition of employment or directly influence the employee's income level, such as with commission-based earnings.

Tax Rates and Tables

Tax is calculated according to progressive tax tables provided by BURS. These tables outline different tax rates based on income levels. Employers should consult the latest tax tables to ensure accurate calculations. As of 2021, these tables were effective from July 1st, and employers should always refer to the most current versions. For the tax year 2025-2026, you would need to access the updated tables for accurate calculations.

Employer Responsibilities

Employers are required to register for PAYE with BURS if they have employees earning above the tax threshold (P2500 per month as of 2021, but subject to change). They must deduct the correct amount of tax each month and remit it to BURS using the prescribed forms (ITW 7A and REM 2) along with a payment slip.

Annual Returns and Tax Certificates

Employers must submit an annual PAYE reconciliation return to BURS within 31 days of the end of the tax year. Additionally, they are required to issue each employee a tax certificate (IRPW) within 31 days of the tax year's end, detailing their earnings and tax deductions.

Other Considerations

Deadlines

As of September 2024, the deadlines for filing annual withholding tax returns (PAYE and other withholding taxes) and individual income tax returns were extended to November 30, 2024, and December 31, 2024, respectively. However, it's crucial to confirm the current deadlines for 2025 filing.

Thresholds

The tax-free threshold for individuals was P480,000 for income from a single employer in 2024. It is essential to verify the current threshold for the 2025 tax year.

This information is current as of February 5, 2025, and may be subject to change due to updates in tax legislation. Always consult the latest official publications from BURS for the most accurate and up-to-date information.

Value Added Tax (VAT) in Botswana is a consumption tax levied on goods and services.

VAT Rates

• Standard Rate: 14% applies to most goods and services.
• Zero Rate: 0% applies to specific goods and services like exports, international transport, certain basic foodstuffs (e.g., brown bread, fresh fruits, rice, milk, samp), and fuel for vehicles.
• Exempt Supplies: Not subject to VAT and include financial services, medical services provided in public medical facilities, supply of prescription drugs, education, and residential accommodation. Private medical services were added to the exempt list as of May 3, 2023.

Registration

• Threshold: Businesses with an annual taxable turnover of BWP 1,000,000 or more, or those expecting to exceed this threshold within the next 12 months, must register for VAT.
• Voluntary Registration: Businesses with a turnover between BWP 500,000 and BWP 1,000,000 can register voluntarily.
• Auctioneers: Must register regardless of turnover.
• Non-Residents: Same rules apply as for resident businesses; a local representative (public officer or director) is required for income tax purposes.

Filing and Payment

• Filing Frequency: VAT returns must be filed every 25 days after the end of the tax period, regardless of whether VAT is payable.
• Payment Deadline: Within 25 days of the end of the tax period. Payment must accompany the return if output tax exceeds input tax.

Additional Information:

• The VAT Act is under revision, and the VAT Bill is expected to be introduced to parliament. As of February 5, 2025, digital tax on electronic transactions is proposed and electronic invoicing (e-billing) implementation is scheduled for completion in December 2024. A "track and trace" solution for excisable goods is planned for implementation by July 2024.
• Penalties apply for late registration, late filing, and non-compliance. Record-keeping is mandatory for a minimum of five years.

Botswana offers several tax incentives to attract investment and stimulate economic growth. As of today, February 5, 2025, these incentives include benefits for various sectors and activities. Note that incentive specifics can change, so staying updated with official sources is recommended.

Corporate Tax Incentives

• Special Economic Zones (SEZs): Businesses operating within designated SEZs enjoy a reduced corporate tax rate of 5% for the first 10 years and 10% thereafter. Additional benefits include exemptions from VAT on raw materials for export manufacturing, no foreign exchange controls, full repatriation of profits and capital, waivers on transfer duty for land and property, and duty-free imports of specialized machinery for manufacturing. Eligibility extends to licensed investors and developers meeting specific criteria outlined in Statutory Instrument 89 of 2021.
• International Financial Services Centre (IFSC): IFSC-accredited companies benefit from a flat corporate tax rate of 15%, exemption from withholding tax on dividends, interest, royalties, and management fees, and unilateral credit for withholding tax paid in other jurisdictions, irrespective of Double Taxation Avoidance Agreements (DTAAs). Certain Collective Investment Undertakings (CIUs) managed by IFSC companies are tax-exempt.
• Manufacturing Companies: A reduced corporate tax rate of 15% applies to manufacturing companies, subject to approval.
• Tax Holidays: Development Approval Orders can grant tax holidays (zero corporate tax) for periods ranging from 5 to 10 years. These are typically awarded to investments deemed significantly beneficial to Botswana's economy.
• Training Rebate: Companies can deduct 200% of their training expenditure when calculating taxable income.
• Duty Rebates: Rebates are available on customs duties and value-added tax (VAT) for imported raw materials and machinery used in manufacturing.

Individual Tax Incentives

• Interest Income Exemption: Interest earned from Botswana banking institutions or building societies is exempt up to BWP 7,800 annually for resident individuals.
• Exemptions for Expatriates: Certain benefits, including one-third of contractual terminal gratuities, are tax-exempt for expatriate employees.

Other Incentives and Considerations

• Double Taxation Avoidance Agreements (DTAAs): Botswana has DTAAs with several countries to avoid double taxation for businesses operating internationally.
• No Foreign Exchange Controls: Businesses enjoy unrestricted repatriation of profits, dividends, and capital.
• Negotiable Tax Holidays: Up to 10 years of tax holidays are negotiable for certain projects, depending on their perceived economic benefits to Botswana.

Application Procedures

The application processes for these incentives vary. Some may require approvals from relevant ministries or authorities. It is advised to consult with tax professionals or relevant government agencies for detailed guidance on specific incentive applications.

It is important to note that this information is for general guidance only and does not constitute professional tax advice. Consulting with a qualified tax advisor is crucial for personalized advice based on specific circumstances.